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While the official cash rate remains on hold, aggregator heads are flagging that mortgage-holders should be seeking credit advice from brokers to access some of the lowest home loan rates in history.
On Tuesday (7 July), the Reserve Bank of Australia (RBA) held firm its commitment to keep the nation’s official cash rate on hold at 0.25 per cent, after RBA governor Philip Lowe stressed that the cash rate would remain unchanged for “some years to come”, with the COVID-19 crisis stifling progress towards the RBA’s employment and inflation targets.
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However, while the cash rate remains on hold, several commentators from the broking industry have outlined that borrowers should not be deterred from seeking credit advice, as record-low interest rates are still available.
Mortgage Choice’s chief executive officer, Susan Mitchell, commented that there were “no surprises” in the July monetary policy meeting, as RBA board members have previously indicated “that the next move for the cash rate will likely be up; however, this is a long while off”.
“In the meantime, the historic-low cash rate continues to support an extremely low cost of borrowing, which is supporting activity in the home loan market,” the brokerage head said.
“Lenders have been pulling out all stops to compete for market share, and over the last few months, we have seen cashback offers and interest rates lowered across both variable and fixed-rate home loan products. This fierce competition has encouraged a vast number of borrowers to switch their home loan providers and refinance their loans.”
According to Mortgage Choice data, a third of borrowers opted to fix either part or all of their home loan interest rate in the month of June, up from the three-month average of 14 per cent to February 2020, which Ms Mitchell suggested was a result of the “uncertainty created by the current economic downturn and the historic-low fixed-interest rates on offer”.
Noting that the latest labour market data from the Australian Bureau of Statistics had shown that the unemployment rate had risen to the seasonally adjusted rate of 7.1 per cent in May 2020, Ms Mitchell said “all eyes are on the federal government to see whether it decides to extend JobKeeper payments beyond the September deadline”.
“Unless we see a dramatic change in economic indicators, we can expect to see the Reserve Bank’s policy setting to remain in place for a long time. My advice to borrowers and prospective buyers alike would be to speak to a mortgage broker to help navigate the current landscape,” the Mortgage Choice CEO continued.
“There are plenty of opportunities for buyers looking to enter the market or upgrade their current home or investment property and for those borrowers looking to refinance to access a better deal. It pays to speak to an expert who can help you understand your options in a rapidly changing climate,” she concluded.
Likewise, the managing director of aggregation group Finsure, John Kolenda, said that home loan customers looking for a better interest rate could benefit from “the intense battle for business” between the nation’s lenders.
Mr Kolenda said lender competition was “great for borrowers, [as] it means they can save a considerable amount off their mortgage by switching from current home loans that are uncompetitive”.
“If you are paying too much, ring your bank and demand a better deal,” he said.
“If they are not prepared to play ball, engage a mortgage broker to find you a lender with a more competitive rate.”
According to the Finsure MD, any borrower with an interest rate above 3.0 per cent should be seeking the expert advice of a mortgage broker to help find a better deal.
“All owner-occupiers should be paying a rate in the low ‘twos’, where some consumers would be saving over 1.0 per cent on a variable loan,” he said.
“On an average loan, this would save hundreds of dollars a month.”
He concluded that complacent borrowers could be costing themselves money and that borrowers should “contact a mortgage broker to make sure you are getting the best terms possible”.
[Related: RBA stance unchanged despite looming ‘shock’]
