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Navigating the interest rates maze

By Don Crellin, Managing Director.

If you’d been comparing interest rates and mortgages in late May, you may have noticed quite a few banks and lenders were making the bold move of reducing interest rates for new borrows. This was in anticipation of what the market thought the Reserve Bank of Australia (RBA) would do on the first Tuesday of June. The market was so confident of a rate cut that many banks wanted to be seen to be first movers. This was great news for people in the market for a new loan.

Then, once the RBA announced a rate cut, there was a flurry of activity as banks and lending institutions rushed to promote how much of the 0.25% cut they would be passing on to customers. But were these cuts for new customers and existing customers? And did the same discount apply to investor-borrowers or owner-occupiers? And what about fixed or variable loans? Was it good news for first home buyers or those with an established home wanting to refinance? While the banks and media were quick to tell us about headline rates, how much they passed onto new verses existing customers, and across different products has caused a lot of confusion. If you saw the headlines but didn’t stick around to read the fine print, you could be in for a surprise when you start digging around.

While interest rate cuts are generally great news for homeowners and borrowers, and more rate cuts are expected from the RBA later this year, understanding how much of a cut you could receive is hard to navigate.

If you’re a first home buyer, you want to be confident that you’re getting the best loan from the many lenders and products, to suite your objectives.

Likewise, if you already have a home loan, you want to be confident your current loan will benefit from a rate cut, while still meeting your needs (although you wouldn’t be expecting a rate cut if you opted for a fixed rate mortgage).

Many of the banks’ new rates won’t kick in for another few weeks, so there’s no need to worry if your repayments remain the same. But at the same time, if you’re waiting around to see how much the rate cuts will impact your mortgage, it could be time to contact your mortgage broker to check in and make sure you will be getting the best loan for your needs today.

And for those who were considering jumping into the property market, it’s a great time to speak to someone about a mortgage to suit your needs, with interest rates being at record lows.

To speak to a Resolve Finance broker, who can help you navigate the raft of products and changing rates, click here or call 1300 883 292.

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