Latest news with #TessSutherland
7NEWS
6 days ago
- Business
- 7NEWS
RBA tipped to cut rates, but only one in ten are reducing repayments
Despite cost of living pressures Australian borrowers are opting to get ahead on their home loans, rather than taking the option to take a cut in their repayments. Australia's biggest lender, the Commonwealth Bank, has reported that only 10 per cent of eligible home loan customers chose to reduce their mortgage direct debit repayments following the May interest rate cut. The announcement comes just one day ahead of the next meeting of the Reserve Bank, to decide the cash rate. All of the big four banks and major economists are pointing to a rate cut bringing the cash rate down to 3.6 per cent. "One in ten eligible customers opted to lower their home loan repayments after the May rate cut, which is really similar to what we saw following February's cut," said Commbank Home Buying General Manager Tess Sutherland. "It shows only a small percentage of customers are freeing up their cash, while most are maintaining higher repayments to get ahead on their loans." Across the February and May rate cuts, the combined 0.50 per cent per annum rate reduction could have delivered savings of around $160 a month for those making principal and interest repayments on an average loan size of $500,000. Of those who chose to reduce their repayments, 39 per cent came from New South Wales, the largest group, ahead of Victoria with 31 per cent. "In a state like NSW, where property prices are the highest in the country, it makes sense more customers are choosing to ease financial pressure by adjusting their repayments. It's a practical way to create breathing room in the budget." "We also found that those in their thirties and forties were the most likely age group to reduce their repayments - perhaps not surprising, given many in this cohort may be juggling school-aged kids and high household costs," said Ms Sutherland. Home loan tactics: take the cut or continue to pay top dollar With the RBA expected to bring down their third rate cut for this year tomorrow, savings can be made. If lenders pass it on in full, borrowers with a $600k mortgage could see their minimum monthly repayments fall by $90, while those on a $1 million mortgage could see their repayments drop by $150. However, deciding to forego the cut in cash now and retaining current payments can also pay off. According to modelling by comparison group Canstar, a borrower with a $600,000 debt and 25 years remaining who keeps their monthly repayments the same could potentially save almost $90,000 in interest over the life of their loan and pay it off four years early. This calculation also relies on a total of four standard cash rates in 2025, as forecast by CBA and that the cash rate remains at 3.35 per cent. Canstar data insights director, Sally Tindall, said while it's up to the banks to hand out the rate cuts, it's borrowers who decide what to do with them. "Keep your repayments the same and you could save tens of thousands of dollars in interest and kick your mortgage to the curb years early," Ms Tindall said. If you do decide to bring down your repayments after a rate cut, it is important to check whether your bank will make the cut automatically, or if you need to request it.
Daily Mail
6 days ago
- Business
- Daily Mail
Commonwealth Bank issues urgent mortgage warning to Aussies: Do this to LOWER your repayments
Australia's biggest home lender is urging borrowers to contact their bank if they want to trim their monthly mortgage repayments following an expected official rate cut tomorrow. Financial markets are universally expecting the Reserve Bank of Australia to cut the cash rate on Tuesday by another 25 basis points, which would take it down to 3.6 per cent for the first time since May 2023. But RBA rate cuts don't necessarily translate into lower monthly mortgage repayments unless a borrower contacts their bank, with an average borrower set to save $100 a month with each cut. The Commonwealth Bank has revealed only 10 per cent of home borrowers chose to reduce their monthly direct debit mortgage repayments in May, when the RBA last cut rates. Borrowers aged 31 to 50, who are more likely to be raising children and battling the cost-of-living crisis, were more likely to opt to reduce their repayments. Investor landlords were also more likely to ask to cut their repayments, despite the tight rental vacancy rate. Commonwealth Bank general manager of home buying Tess Sutherland said most borrowers preferred to keep their existing monthly repayments, following an RBA rate cut, so they could pay off their loan faster. 'One in ten eligible customers opted to lower their home loan repayments after the May rate cut, which is really similar to what we saw following February's cut,' she said. 'It shows only a small percentage of customers are freeing up their cash, while most are maintaining higher repayments to get ahead on their loans.' Of those who chose to reduce their loan repayments, 39 per cent came from New South Wales, the home of Australia's most expensive property market, Sydney. Ben Perham, Macquarie Bank's head of personal banking, said many borrowers battling the RBA's 13 hikes in 2022 and 2023 had forgotten about the process of asking for mortgage repayments to be lowered after RBA cuts. 'It's been a long time since a rate-cutting cycle and many Australians with a mortgage or savings account may need a rate cut refresher,' he said. 'The questions you need to ask your bank in a falling rate environment are different, and the answers they give you could cost you thousands. 'If you're not getting the best deal, it's time to switch.' Borrowers can pay off the principal of their mortgage faster if they keep their repayments unchanged following an RBA rate cut. Canstar calculated a borrower with an average, $660,000 mortgage would save $150,854 and be paid off six years earlier, on a 30-year loan, if they opted to keep repayments the same instead of reducing their repayments every time the RBA cut rates. Sally Tindall, Canstar's data insights manager, said this was the best way to get ahead financially. 'Not automatically adjusting a borrower's direct debit in the event of a rate cut might seem, at first glance, unfair but it actually unleashes the potential for you to save tens of thousands – in some cases, hundreds of thousands – in interest charges if you can keep those higher repayments up for the life of the loan,' she told Daily Mail Australia. 'The bank will still automatically apply the rate cut, if they have announced it will be passing it on in full, but if your monthly repayments stay the same, the extra money you are no longer paying to your bank in interest charges will instead go into your home loan as an extra repayment, essentially helping you pay off your debt faster.' Canstar calculated that staying with the same repayment would mean $503,444 in interest over the life of the loan instead of $654,298 - a saving of $150,854. Headline inflation in the March quarter fell to just 2.4 per cent, putting it on the lower side of the Reserve Bank's two to three per cent target. A monthly inflation measure for May showed the consumer price index falling even lower to 2.1 per cent. Australia's Big Four banks, as a result, are all expecting a rate cut on Tuesday afternoon. They had been expecting the RBA to wait until August, following the late-July release of June quarter inflation data. The futures market is now expecting the RBA to cut rates in July, August, and again in November, which would take the cash rate to 3.1 per cent for the first time since February 2023. A quarter of a percentage point rate cut on Tuesday would save a borrower with an average, $660,000 mortgage $106 a month on repayments, if they contacted their bank. This would see monthly repayments fall from $4,081 to $3,975, as a popular CBA variable rate fell from 6.29 per cent to 6.04 per cent. A borrower, however, can make even lower minimum monthly repayments of $3,645, but take longer to pay off their loan.
Canberra Times
6 days ago
- Business
- Canberra Times
RBA tipped to cut rates, but only one in ten are reducing repayments
Despite cost of living pressures Australian borrowers are opting to get ahead on their home loans, rather than taking the option to take a cut in their repayments. Australia's biggest lender, the Commonwealth Bank, has reported that only 10 per cent of eligible home loan customers chose to reduce their mortgage direct debit repayments. Pic: Shutterstock Australia's biggest lender, the Commonwealth Bank, has reported that only 10 per cent of eligible home loan customers chose to reduce their mortgage direct debit repayments following the May interest rate cut. The announcement comes just one day ahead of the next meeting of the Reserve Bank, to decide the cash rate. All of the big four banks and major economists are pointing to a rate cut bringing the cash rate down to 3.6 per cent. "One in ten eligible customers opted to lower their home loan repayments after the May rate cut, which is really similar to what we saw following February's cut," said Commbank Home Buying General Manager Tess Sutherland. "It shows only a small percentage of customers are freeing up their cash, while most are maintaining higher repayments to get ahead on their loans." Across the February and May rate cuts, the combined 0.50 per cent per annum rate reduction could have delivered savings of around $160 a month for those making principal and interest repayments on an average loan size of $500,000. Of those who chose to reduce their repayments, 39 per cent came from New South Wales according to Commbank. Pic: Shutterstock Of those who chose to reduce their repayments, 39 per cent came from New South Wales, the largest group, ahead of Victoria with 31 per cent. "In a state like NSW, where property prices are the highest in the country, it makes sense more customers are choosing to ease financial pressure by adjusting their repayments. It's a practical way to create breathing room in the budget." "We also found that those in their thirties and forties were the most likely age group to reduce their repayments - perhaps not surprising, given many in this cohort may be juggling school-aged kids and high household costs," said Ms Sutherland. Home loan tactics: take the cut or continue to pay top dollar With the RBA expected to bring down their third rate cut for this year tomorrow, savings can be made. If lenders pass it on in full, borrowers with a $600k mortgage could see their minimum monthly repayments fall by $90, while those on a $1 million mortgage could see their repayments drop by $150. However, deciding to forego the cut in cash now and retaining current payments can also pay off. According to modelling by comparison group Canstar, a borrower with a $600,000 debt and 25 years remaining who keeps their monthly repayments the same could potentially save almost $90,000 in interest over the life of their loan and pay it off four years early. This calculation also relies on a total of four standard cash rates in 2025, as forecast by CBA and that the cash rate remains at 3.35 per cent. Canstar data insights director, Sally Tindall, said while it's up to the banks to hand out the rate cuts, it's borrowers who decide what to do with them. "Keep your repayments the same and you could save tens of thousands of dollars in interest and kick your mortgage to the curb years early," Ms Tindall said. If you do decide to bring down your repayments after a rate cut, it is important to check whether your bank will make the cut automatically, or if you need to request it. Of the big four banks, only Westpac automatically lowers customers' direct debit if it's set to the minimum.
