After the Reserve Bank of Australia reduced the cash rate recently, if you expected your bank or mortgage lender to pass on the full rate cut immediately, you might still be surprised to find out that you’re paying more than you should be.
If your bank doesn’t consistently pass on the full rate cuts that are offered from the cash rate, you should get together with your mortgage broker in Kwinana, or wherever you are in Australia, so that you can look either at alternatives of different lenders who will offer you a better deal, or have your mortgage broker approach your current lender and threaten to leave them if they won’t offer an improved arrangement.
Banks Have Withheld Cash Rate Cuts
You can check with your mortgage brokers in Rockingham to find out if your current mortgage lender regularly passes on the full cash rate cuts to your standard variable rate mortgage.
For a simple comparison, if your bank didn’t pass on just 0.05% of the recent cut, where your mortgage is $300,000, you will be overpaying by $10 a month which is equal to $120 a year. Even though that doesn’t appear to be too much, wait until you realise that’s worth $2811 over 25 year mortgage term. If you invested the money instead in your savings account, you would be looking at quite a healthy amount after 25 years of saving just $10 a month.
The big banks have not paid around one third of all of the cash rate cuts during the last five years.
Ways to Challenge Your Bank
It’s always easier if your mortgage brokers are able to challenge your bank for you because your bank will understand that your mortgage broker will simply suggest a different lender to you if the bank isn’t going to meet your demands.
Where your direct debit repayment doesn’t change with the bank automatically, when they do reduce your loan through a rate cut, you will be overpaying your debt each month. While this does reduce your overall debt over the longer term, you may prefer the money in your hands to clear other debts.
The bank’s standard variable rate is a rate that no one should really be paying because they will offer discounts to keep you as a customer and many will only put you on their standard rate if you don’t know any better. Your mortgage broker in Baldivis will know which deals are available from your bank, with deals offered to new customers often the best to be seen.
You can threaten to leave the bank and take your business elsewhere, but this will only be applicable if you can easily gain a new mortgage from one of the other banks and lenders that are available. Your bank will check your credit rating to know whether you can walk away easily and will probably offer you a deal related to the chances of you leaving. Nevertheless, you won’t get a discount unless you ask for it.
If your bank were expecting you to move your mortgage elsewhere, that’s perhaps a good time to change to another lender to make the most of some of the great deals that are available.
You don’t have to stay at the mercy of your bank if they don’t pass on the full interest rate cut, but talking the situation through with your mortgage broker will reveal how you can move forward to get a better deal. We can help you find out the right options for home loans in Baldivis, Rockingham, Kwinana, and the surrounding areas.