You might be surprised to see that some banks have reduced interest rates on home loans. While there’s often a catch, here’s why you should pick up the phone.
These are the words many Australians would love to hear right now: your bank is lowering interest rates.
You may have seen recent reports of banks cutting variable mortgage rates – often shortly after raising them following the Reserve Bank of Australia’s official exchange rate lift.
Commonwealth Bank cut its lowest floating rate by 0.15% on Thursday, ME Bank also cut some of its floating rates on Tuesday, Macquarie Bank cut variable rates on home loans by up to 25 basis points the last week and ANZ took a similar decision in May.
But RateCity research director Sally Tindall warns there is a catch.
“The big catch with these rate cuts is that they’re usually only for new customers,” she told news.com.au.
“What these cuts show is that competition in the variable home loan market is as fierce as ever, despite the RBA’s cash rate hikes.”
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If you are already a customer of one of these banks, you might be disappointed to learn that a better rate is offered to new customers. But Ms. Tindall has some advice for you.
“If your bank offers lower rates to new customers, pick up the phone and ask them where their loyalty stands,” she said.
“If they don’t budge, it might be time to take your mortgage and take it to a lender willing to offer you a competitive rate.
“If you’re on a variable rate that’s on the rise, you can take steps to minimize the damage by refinancing with a more competitive lender.
“Most variable rate customers are now facing significantly higher refunds, with further hikes to come in the coming weeks.
“However, customers eager to shop for home loans can potentially get themselves a rate cut to help soften the blow.”
The Reserve Bank of Australia raised the key rate by 50 basis points in June, following a 25 basis point hike in May.
A third consecutive rate hike is expected next Tuesday, following the RBA board meeting in July.
Owners were reassured when RBA Governor Philip Lowe recently told a UBS roundtable in Zurich that it wouldn’t be as big as many feared, saying a rise in interest rates Interest of 0.75 percentage points was “not on the table” this time around. .
The RBA will continue to raise the policy rate in the coming months to curb inflation.
After the RBA’s first cash rate hike in May, Macquarie’s global head of strategy Viktor Shvets said he believed central banks would consider cutting rates again within 12 months.
“My view for some time has been that over the course of 2023 and 2024 there is a much higher likelihood of fiscal and monetary policy easing than tightening,” he told the Macquarie Australia Conference. , according to Financial analysis.
“What’s going to happen is that when the Federal Reserve starts tightening – via quantitative tightening and rate hikes – and rates get closer and closer to neutral, asset price volatility will increase considerably.
“When that happens, the financial conditions index will explode and at that point inflation and growth rates will start to disappear and the Federal Reserve will have no choice but to back off.”