Home Loan Variable: 2.51% (2.53%*) • Home Loan Fixed: 2.99% (2.64%*) • Fixed: 2.99% (2.64%*) • Variable: 2.51% (2.53%*) • Investment IO: 3.05% (2.96%*) • Investment PI: 2.71% (2.73%*)

HOW HAS THE NEW RBA CASH RATE DROP AFFECTED YOUR HOME LOAN?

Who is cutting rates, when and by how much? That’s the question on everyone’s lips following the latest RBA decision to drop the cash rate on 19 March 2020.

Below is a list of what each lender has announced in response to the RBA’s decision: 

ANZ
Rate cut: 0.15%  
Applies to: Variable home loan rates
Announcement date: 20 March
Effective date: 27 March (8 days after RBA cut) 
Other info: Some fixed rates for home loan customers cut by up to 49 basis points. Introduction of a two-year fixed rate of 2.19% p.a. for Owner Occupiers paying Principal & Interest –  ANZ’s lowest fixed-rate home loan on-record.
 
Bank of Melbourne / StG / BankSA –
Rate cut: 0% for variable
Announcement date: 20 March
Other info: 1,2,3-year fixed rate home loans for owner occupied loans on P&I repayments with an Advantage Package cut to 2.29% pa
 
CBA
Rate cut: 0% for variable
Announcement date: 19 March
Other info: 1,2,3-year fixed rate home loans have been cut by 0.70% for owner occupied loans with P&I repayments (now 2.29%), 0.40% for owner occupied loans with IO repayments (now 3.39%), and 0.50% for investment loans (now 2.69% for P&I and 2.89% for IO) on the MAV package.
 
Firstmac
Rate cut: 0%
Applies to: all home loan interest rates
Announcement date: 23 March
 
Macquarie
Rate cut: 0% for variable loans
Announcement date: 20 March
Other info: 1,2,3-year fixed rate home loans for owner occupied loans on P&I repayments have been cut to 2.39% pa
 
ME Bank
Rate cut: 0% for variable loans
Announcement date: 23 March
Other info: 1,2,3-year fixed home loans for owner occupied loans on P&I repayments cut to 2.19% pa
 
NAB
Rate cut: 0% for variable loans
Announcement date: 20 March
Other info: 1,2,3-year fixed home loans for owner occupied loans on P&I repayments cut by up to 0.60% (2.39% for 1-2 years, 2.29% for 3yrs and 2.19% for 2yrs if you are a first home buyer).
 
Pepper
Rate cut: 0%
Applies to: all home loan interest rates
Announcement date: 24 March
 
Suncorp
Rate cut: 0% for variable loans
Announcement date: 23 March
Other info: dropping  fixed rate owner occupied loans on P&I repayments to 2.29% for 2year fixed and 2.49% for 3year fixed
 
Westpac
Rate cut: 0% for variable loans
Announcement date: 20 March
Other info: 1,2,3-year fixed rate home loans for owner occupied loans on P&I repayments with a Premier Advantage Package cut to 2.29% pa

Your existing fixed rate loan

For those of you with fixed rates; I have had quite a number of you ask me if it’s worth considering breaking your fixed rate loan (and paying the early repayment fee) to either reduce the loan interest rate to the current variable that’s being offered by your lender, or even re-fix at a much lower rate.

Here’s a scenario from one of our clients:

$662k owner occupied fixed loan at 3.89%, fixed for another 8 months.
Cost to break the loan: $3,200 approx + $250 switch fee
As the LVR on this loan is over 80%, I didn’t suggest switching lenders (to grab one of the refinance rebates* on offer – more on that below) because LMI (Lenders mortgage insurance) would have been payable again. However, if this client broke the current fixed rate, then re-fixed at 2.88%, they’d save $6686 per annum interest.

It worked out better for this client to pay the early repayment and switch fee, as they would “buy back” the cost in under 6 months and then would be $557 per month better off.

If you have a fixed loan in place and you’d like us to crunch these numbers for you, please get in touch as we’d be happy to help.

Refinance rebates

A bunch of lenders are currently offering refinance rebates, meaning that if you switch from one lender to another, the new lender will give you some cash to help cover the costs of refinancing. Typically, if you were to refinance a variable loan, it would cost you around $600-$1000 (bank fees and government fees) to make the switch.

The refinance rebates currently on offer are:

ANZ
$2,500 cash back on eligible refinanced loans of $250K+
Bank of Melbourne, BankSA, St George
$4,000 for the first application and a bonus $2,000 for every additional property.
CBA
$2,000 for owner occupied home loans with principal and interest repayments only, and investment loans.
NAB
$4,000 when you refinance a home loan of $250,000 or more.
Westpac
$2,000 cashback for new Owner Occupier with Principal & Interest repayments and Investment loans.
 
Before switching lenders you should …
Approach your current lender and ask them to drop your interest rate in line with what they’re offering new customers (we can do this for you! Please ask).

If your current lender wont play ball, then it would be worth considering a refinance.

Note: In most cases, if your LVR is over 80% (i.e. less than 20% equity in the property) then it’s not worth refinancing because you’d have to pay LMI (lenders mortgage insurance) again.

If you would like us to approach your current lender to see if we can get your rate reduced, please get in touch.

Is there a silver lining?

When things look bleak, there’s always a silver lining if you look deeply enough for it. You’re it for me (along with mine and my team’s health and wellbeing) so hang in there – we will get through this.

As I’ve already mentioned, this might be the perfect time for you to refinance your home loan. Book a phone appointment if that’s something you’d like to find out more about.

According to Corelogic:

In the long term we are expecting economic conditions will rebound from the pandemic-related slowdown through the second half of 2020.

For buyers who have the confidence and financial well-being to remain active in the housing market through this period of weakness, there could potentially be some good buying opportunities to secure properties at a competitive price and at ultra-low interest rates.

Download our complimentary First Home Buyer Guide. Packed with 40-page of information it will start you on your journey.

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