Homeowners can now expect smaller mortgage payments when they take out a new home loan from some of the biggest banks in Australia. Following the interest rate cuts of .25 percent, homeowners can now see loans with an interest rate as low as 5.65 percent.
This reduction will help reduce monthly payments for new homeowners. Buyers with a $300,000 loan could see a bill that’s around $50 lower per month. The net savings of the average family could be around $600 per year.
The interest rate reduction was announced by Treasurer Joe Hockey who said that, “This is good news for Australian families and its good news for Australian business … its good news for jobs and its good news for households.” This reduction leaves the interest rate at the lowest it’s been since 2013 and opens the door for some of the cheapest home loans in 40 years.
Most small banks jumped quickly to reduce their rates and more are expected to lower interest rates to meet the new cuts.
There are several ways these lower interest rates could impact consumers. The most common places Australian families can expect to see a difference include:
New home loans: The lower rates will impact new home loan rates. In addition, residents who are interested in refinancing their home may be able to take advantage of lower interest rates. The reduction of home loan rates could allow more interested buyers the opportunity to purchase a home. Individuals with current loans are also likely to see reduced monthly payments as a result of the lowered interest rates.
Lower dollar value: Generally when interest rates are slashed the value of the dollar decreases. While this could benefit business owners who could see an increase in business and exchange rates allow overseas clients to purchase more, the local consumer is likely to see prices increase, particularly on imported items.
Cheaper Credit for Business: Business owners will be able to receive and offer cheaper lines of credit which could give the economy a much needed boost. Some consumers could see a change in credit card interest rates, though not all cards are impacted by this change.
Lower returns on savings: If you have your money stashed in a savings account, you’ll likely see lower returns for your savings. In the last five years the average return has dropped around 5 percent. With additional adjustments to the interest rate, savers should expect to see further decline in interest rates on their term-deposits.
The rate reduction, the first reduction in almost 18 months, is designed to help stimulate the economy and help businesses and consumers save money.
With the new interest rate cuts, Aussie families can enjoy great benefits when they apply for new home loans or second mortgages on existing home loans. Speak to your financial specialists to find out how you can take advantage of this amazing opportunity.