Rate Cut Reality Check

As we are heading into anticipated cash rate cuts by the RBA this year, it’s crucial to understand how this change may affect your mortgage and finance position.

Let’s explore what you need to know and why now may be the perfect time for a mortgage review or a borrowing capacity exploration session.

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What happens when there’s a cash rate cut?

When the RBA lowers the cash rate, it typically leads to a reduction in interest rates across the economy. However, it’s important to note that while banks and lenders often respond by lowering their home loan interest rates, they’re not obligated to follow suit. And they can take their time…

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Will your lender pass on the rate cut?

The short answer is - it depends!

Each lender reacts differently to RBA rate cuts in an attempt to remain competitive. Some may pass on the full cut, others only a portion, and some might not reduce rates at all. It’s a lever that all banks can use to their advantage. They may also offer new clients the lower rate but only pass on some of the reduction to existing clients.

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Are you still receiving the most appropriate finance solution?

Even if your lender passes on the rate cut, it doesn’t necessarily mean you’re still in the most appropriate finance solution for your situation.

Loan products that once looked competitive rarely remain so two years later. This is why it’s crucial to regularly review your mortgage.

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Why now may be the perfect time for a mortgage review

1. Potential savings

With expected future rate cuts, you could potentially save on your monthly repayments.

2. Increased borrowing capacity

Lower rates may improve your borrowing power and open new opportunities.

3. Market competition

Lenders will be eager to win new business and retain customers by potentially offering better deals.

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A word for those about to come off fixed rates

If you’re one of the many Australians coming off a fixed interest rate soon, please pay close attention. When your low fixed interest rate period finishes, you typically roll into your lender’s current variable rate unless negotiated otherwise.

Bear in mind that your existing lender may not be offering you the most affordable rate compared to other products they have or what other lenders are able to offer. This is because lenders often reserve their best rates for new customers to attract business.

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The value of professional help

In this changing landscape, the expertise of our finance team becomes even more valuable. The mortgage and finance broking industry has evolved significantly by adapting to regulatory reforms and continuing to provide substantial contributions to the Australian economy.

By having a mortgage review with our finance team, you can:

1. Ensure you’re receiving a competitive rate

2. Explore refinancing options if beneficial

3. Understand how the rate cut affects your specific situation

4. Potentially increase your borrowing capacity for future investments

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Remember, while a rate cut might seem like automatic savings, the reality is more complex. It’s not just about securing a lower rate, but also about finding the most appropriate finance solution for your unique circumstances.

2025 will be a great year to take the opportunity to optimise your mortgage strategy.

Reach out to our finance team today for a comprehensive mortgage review.

In a market where every basis point counts, expert guidance can make all the difference to your future finances.

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If you'd like help with assessing your personal and financial situation, as well as comparing the loans in the market to see if you're truly getting the right deal for you, then call Bob Malpass now on 0431 862 136, email bob@westhomeloans.com.au