What the Rate Rise means

The ANZ, Commonwealth Bank, National Australia Bank and Westpac raised their standard variable mortgage rates by 25 basis points following the Reserve Bank’s decision to raise the cash rate from 3.0 to 3.25%. Although this is only a moderate increase, further interest rate rises are expected before Christmas due to unexpected improvements in employment and the growing strength of the Aussie dollar.

As a result of the rough economic climate, banks have tightened their lending criteria. However, having said that, lenders are now more inclined to approve loans on a case by case basis scenario. As such, borrowers with a lower credit risk, larger deposit and who are considered “safer” bet may be able to negotiate a lower rates.

Aussies capable of saving up a greater deposit are also in the best position to withstand interest rate rises. For example, if you took out a 90 per cent loan for a $300,000 property, and interest rates increased to their 9 percent levels of last year, you’d be looking at total payments of $2,265 over the next 25 years of the loan. If you had only borrowed 80 percent, your payments drop to $2,014 – a difference of more than $75,300 over the life of the loan.

Although interest rate rises are inevitable, now is the best time to compare home loan rates online and snap up the best deal to meet our needs. So, check out the home loan section of our website and see how we can help you save money today and in the future.

Happy savings!

Dave Kaplan.