What does the December RBA rate decision mean for me?

In breaking news the RBA has announced that the cash rate will remain on hold at the historically low rate of 0.1%.

First thing first – don’t assume this means you automatically have your lender’s best rate, or the best rate on the market for that matter! You can easily find out if you could be on a better rate and saving money on your home loan by checking your loanScore. Check your loanScore nowYou’re also probably wondering what all this means for you and your current home loan? Well, how this affects you will depend on the kind of rate you are on (fixed or variable) and which bank you’re with.

What you should do if you’re on a variable rate

If you’re on a variable rate, your bank may cut rates in line with the official cash rate, giving you some reprieve on your home loan. You may find you get a nice drop in your weekly or monthly repayments. Lenders are not obliged to pass on rate cuts and many don’t. This is a good time to shop around and check your rate against others in the market. Just because your bank hasn’t passed on the rate cut doesn’t mean other banks won’t.

What you should do if you’re on a fixed rate

Being on a fixed rate means just what it sounds like – your rate is locked in for a certain amount of time. You may have chosen to lock in for 1 year, 3 years or 5 years – either way, if best home loan rates go up or down, your rate ain’t budging. While you might be resenting the fact that you’re now on a higher interest rate than some others advertised at the moment, there are a few things you can do:

Find out the break costs

Sometimes the break costs attached to a home loan are worth paying because the interest you’ll save by switching to a better rate covers the cost of breaking it. Ask your lender what the break costs would be and get UNO to help you do the math on whether it’s worth switching now or waiting ‘til the end of your loan term.

Get ready to refinance at the end of your fixed term

Your lender might send you a fixed rate review letter towards the end of your loan. Others automatically put you on a variable rate when your time is up. It’s a good time to review your rate and see what else is around. It’s always worth asking your lender for a better rate; other times you’ll get a more competitive deal by switching to another lender.

Why refinancing might be a good idea

Many Australians don’t refinance out of loyalty to their current lender, or they just don’t have the time and even sometimes just out of simple dread of having to call their bank. UNO’s Active Home Loan Management service is founded on the principle of acting in the best interests of home loan customers. We’ll proactively manage your home loan on your behalf, so you don’t have to worry about seeming disloyal, or unclear of what to ask for or feel fearful of calling your bank. Let us do all that for you. Here’s an example of what might happen if you choose to refinance:

• UNO had a customer who was on a 7.8% interest rate they’d been on for about 10 years. With online home loan rates on the market now starting with a 2 and 3, a 7.8% rate is not very competitive. Uno was able to switch the customer to a better deal. They refinanced their loan to a 3.3% interest rate and saved about $25,000 a year.
• Another customer was paying $32,000 a year in interest and was able to more than half that amount down to $13,200 a year by switching to a better rate.
• Lenders on our panel are offering competitive rates currently starting from 2.19%1 (2.61% comparison rate)2 so with UNO, homeowners can be confident they understand the value of their home loan and are given the opportunity to save money when savings become available. Keen to get started? Let us help you find a better home loan today.Photo Credit: Channel 9 News, Reserve Bank.1. Two year fixed rate, owner occupier, P&I loan with a maximum LVR of 95% and a loan amount >$50,000. Must be packaged with a P&I variable loan. Lender rates and products may change. We cannot suggest you remain in or switch to any loan until we complete our assessment. Fees and charges apply.2. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. Book a call in with UNO