IF the latest 0.25% interest rate cut is fully passed on by the banks, the average mortgage holder could at least $58 a month. The Commonwealth and National Australia banks stuck with the RBA whilst ANZ cut its loans by only 0.18%.
According to Ratecity, the average mortgage holder with a $400,000 loan will save around $58 a month or $700 a year. If they put that $58 a month back into their loan, they could save up to $18,523 in interest over 30 years and shave up to 1 year, 7 months off their mortgage.
Ratecity search director Sally Tindall said the decision will provide some much-needed relief to mortgage holders
“Importantly, for many families, it will also be a chance for to get ahead on their loan,” she said. “Australia’s household debt to disposable income ratio remains at a record high at 189.6 per cent and continues to be a pressing concern for the RBA.”
Impact of 0.25% rate cut on average home loan rates
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Finder said the average home loan size in Australia is $384,700, while the average variable rate sits at 4.91%. This 25 basis points cut to 4.66% could lead to a savings of almost $21,000 over the life of the loan.
“Alternatively, if the average Aussie chose to continue paying down their mortgage at their previous rate this could shave almost 2 years (22 months) off their loan term, meaning they could become mortgage-free sooner. In addition, they could pocket around $43,000 in interest saved,” Finder insights manager Graham Cooke said.
So far, not all of the big four have not passed on the rate cut in full.
ANZ and Westpac reduced their rate variable home loan by 0.18% and 0.20% respectively.
Whereas the Commonwealth Bank and National Australia Bank followed the RBA, reducing their standard variable home loans by 0.25% to 3.54%.
For the average existing CBA customer on a discounted variable rate this equates to saving $60 a month or $719 a year. In comparison, a NAB customer will save around $59 a month or $708 a year.
The non-major lenders were inline with the RBA, namely RACQ Bank, Athena Home Loans, Bananacoast Community Credit Union and Reduce Home Loans.
Reduce now boasts the lowest ongoing variable rate on the market with 3.19%.
Australian Property Journal