Rate hold decision no cause for borrower complacency: Mortgage Choice and RateCity

While disappointing, today’s decision by the Reserve Bank to leave the cash rate unchanged at 4.25% does not mean borrowers should be complacent about their current mortgage providers, say Mortgage Choice and RateCity.com.au. 

Both are urging borrowers to examine their current home loans to ensure they’re getting the best deal.

“I’m sure borrowers and consumers alike were hoping for a cut by the Reserve Bank to the cash rate ahead of the Easter long weekend,” says Mortgage Choice spokesperson Belinda Williamson. 

“However, the bank has made it fairly clear that they need our domestic data, most of which will be updated this month, to decline further before they feel compelled to move rates.

“Nevertheless, today’s decision to keep the cash rate on hold at 4.25% is no cause for complacency among home loan borrowers.

“Borrowers who allow their home loan to lay idle and assume their lender is doing everything they can to help them reach their home ownership goal may be surprised at what they could be missing out on,” she says.

“Without comparing their lender’s loan products to those offered by others, they may be passing up the opportunity to save thousands of dollars in interest and shave months, or even years off their home loan term.

“Now is a good time for borrowers to investigate how their lender rates against others in the market in terms of product pricing, service quality, accessibility, and the flexibility to accommodate your changing needs or circumstances,” she says.

RateCity CEO Damian Smith says borrowers don’t have to accept higher mortgage costs. 

“We’ve found 14 lenders that lifted their variable rates by as much as 15 basis points last month, which is worth an extra $30 per month for a $300,000 mortgage (based on a rate of 7% compared to 7.15% over 25 years),” Smith says. 

“This follows 44 lenders lifting rates in February – despite neither month seeing any change in the official cash rate."

“Rates will continue to be volatile, with frequent small movements from lenders most months this year. 

“But that doesn’t mean borrowers should accept higher rates. The slow mortgage market – where there were 200,000 less mortgages written last year compared to five years ago – means the ball’s in the borrower’s court. 

“Borrowers should compare what their lender is charging by using credible financial comparison websites like RateCity and demand a discount if it’s higher than what other lenders are offering. If they can’t beat it, then make the switch.” 

According to Smith, most lenders, particularly major banks NAB, Commonwealth Bank and Westpac, are likely to wait for ANZ’s announcement of any rate movements from its Rate Review meeting on April 13 before they decide to move their rates. 

“ANZ Bank has become the de facto price setter for the mortgage industry as we believe that most lenders will wait until after ANZ reviews rates on Friday, April 13 before deciding whether to move their own rates. 

“What this means is that we now need to know both the RBA’s decision and the ANZ’s decision before seeing what the rest of the market will do,” he says.