We have seen the lowest mortgage rates for decades, and I do not recall the Official Cash Rate ever being this low. They will most likely reduce again in the next 90 days but this is not guaranteed, but you can read more about further cuts here.
So how can you take advantage of the lowest mortgage rates in years?
Here are my top 3 tips which will help you position yourself to take advantage of these and to improve your long terms financial position.
- If your bank has reduced your payment to reflect a lower interest rate, then ask if you can keep your payments the same. Banks will normally reduce your payment to the minimum so they can keep your mortgage to run its full term (which only benefits them and not you). This will help you pay off your mortgage quicker and save you thousands of dollars in interest over the long term.
- If you are paying monthly, consider switching to fortnightly repayments. There are 26 fortnights per year and this means you make one extra payment per year and you pay half of your payment 2 weeks earlier which also saves you interest so pay more frequently if you can. This will also save you thousands of dollars in interest.
- Interest rates for credit cards, personal loans etc still seem to be very high and have not been moving lower in line with the OCR. My suggestion is to consolidate these high-interest cost finance and since we have the lowest mortgage rates in years put these on your home loan and pay much lower interest. However, here are a few words of caution. If you consolidate your personal lending into your home loan, don’t go out and then max out your credit cards etc. Also, the payments you were making on your credit cards, personal loans etc, make the same payments on your mortgage balance. Remember, you are refinancing to save interest, not to have more money in your pocket for entertainment.
Reduce debt now while we have the lowest mortgage rates we have had for decades.
If you are struggling financially and have debt you cannot manage, then now is the time to start making a dent in your debt and repay this. If you are not able to repay your debt in a time where there are record low mortgage rates, then maybe you should seek some budgeting advice.
There is nothing wrong with seeking budgeting advice, businesses do this all the time. It does not mean there is something wrong with you, but professional advice maybe what you need to make the changes you need to do better financially, do it now while we have the lowest mortgage rates.
Need mortgage advice?
If you need help refinancing or restructuring your mortgage finance, then please contact me.