Paul Clitheroe says time to shop around for cheaper varaiable interest rates
Financial adviser Paul Clitheroe says despite a string of rate cuts in the last 12 months, many borrowers are still paying more on their home loan than they were three years ago.
"Home owners may have breathed a sigh of relief when the Reserve Bank of Australia (RBA) announced its latest cut to official interest rates but keep a close eye on how your lender responds," he said.
"If you're not getting a decent share of the recent rate cut, it could be time to find a better deal,' said Paul Clitheroe who is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine.
"The RBA's official cash rate of 3.25% is now at a 3-year low, and the October rate cut will undoubtedly be welcomed by families with a variable rate mortgage as the expensive holiday season is just around the corner.
However despite a string of rate cuts in the last 12 months, many borrowers are still paying more on their home loan than they were three years ago."
He said it essential for borrowers to keep track of their home loan rate and compare it to what was available elsewhere.
"The cash rate may be at its lowest level since October 2009, but the same can't be said about mortgage rates."
Back in October 2009, when the cash rate was also 3.25%, the average rate on standard variable loans was 5.7%.
The average is 6.35% now - but Clitheroe says with some shopping around borrowers can secure a far lower rate.
He noted according to comparison site RateCity, the difference between the lowest and highest variable home loan rates is currently 1.8%.
"On a loan worth $300,000 that can mean paying an extra $355 per month - money that's going straight to your lender's coffers with no benefit to you," he said on his website, www.paulsmoney.com.au.
