Experts tip RBA to keep rates on hold

Word on the street is that the Reserve Bank won’t cut the cash rate when it meets today. However, one of Australia’s biggest comparison websites - finder.com.au – says borrowers can still find ways to save on their home loans by exploiting competition among lenders.  

The company’s resident rate experts – who include eight leading economists – expect the RBA to keep the cash rate at 2.50%.  

Finder.com.au’s resident rate experts	Do you think the Reserve Bank will move the cash rate on October 1?
Warren Hogan, ANZ	No
Janu Chan, St George Bank	No
Scott Haslem, UBS	No
Alan Oster, NAB	No
Michael Witts, ING Direct	No
Paul Bloxham, HSBC	No
Shane Oliver, AMP	No
Carla Boldock, RAMS	No

Source: Finder.com.au

Despite this, there is still significant opportunity to save as lenders fight for market share.  

For instance, the major four banks – ANZ, Commonwealth, NAB and Westpac – increased market share over the past year, while non-bank lenders continue to undercut by offering cheaper deals.  

According to Australian Prudential Regulation Authority data crunched by finder.com.au, the big four banks now claim up to 85% of the total value of owner-occupied home loans of all banks as at July 2013, up from 80% in July 2012.  

Of the ‘Big Four’, NAB and Westpac offer the lowest advertised packaged variable rates for a $300,000 home loan, at 5.08%.  

But Finder.com.au says non-bank lenders lead the pack overall: the lowest rate for this loan size is 0.53 percentage points cheaper at 4.55% by lender loans.com.au.  

Spokesperson at Finder.com.au, Michelle Hutchison, says many borrowers and first home buyers are unaware of the fight for market share between lenders and are missing out on potentially thousands of dollars by not comparing home loans online.  

“While the major banks continue to be the most popular lenders among borrowers, smaller lenders are quietly fighting back by undercutting the major banks on more fronts. Many non-bank lenders are growing more diverse with their product and service offerings, and continue to beat the major banks on price.  

“It’s easy for borrowers, particularly first home buyers, to go straight to a major bank, but it could end up costing them thousands. For instance, the difference between the lowest variable rate of the major four banks for a $300,000 home loan (5.08%) compared to the lowest variable rate for this loan size on Finder.com.au (4.55%) would cost $96 extra per month, $1154 every year or over $34,000 over the life of a 30-year loan term.”  

How to score a better home loan this spring:

1. There’s no loyalty in the home loan market: if you’ve had a Dollar Mite account since you were a kid it doesn’t mean you will get a better rate on your home loan. And borrowers who have been with same lender for a long time won’t necessarily get a good deal either. Don’t rely on lenders to tell you that you’re getting a good deal – make sure you know by comparing loans and negotiating hard.

2. Compare online before hitting the market: finding the right home loan, getting pre-approval and working out how much you can afford to borrow before you start bidding is the key to financial stability. You can do all of this on comparison sites like Finder.com.au.

3. Keep aside an emergency buffer: be careful when working out your budget. If you can only afford monthly repayments of $2000, at the current average variable rate of 5.63% that could be a loan size of $347,000. But, if rates rise to 7%, the loan will cost an extra $309 a month. Factor in a buffer as rates won’t stay this low forever.