Many economists had bet the Reserve Bank would cut rates by 0.25 per cent due to worries about the economic situation in Europe. However, rates will remain at 4.25 per cent.
“Today’s decision leaves the gate open for the Reserve Bank to cut rates should the situation in Europe sour,” says Domain property expert Carolyn Boyd. The move follows back-to-back rate cuts in November and December last year.
Each 0.25 per cent drop in interest rates slices about $60 off the monthly interest cost of an average Australian mortgage.
Boyd says although rates have remained on hold today, mortgage holders might still be able to win themselves a rate cut by shopping around for a better deal from lenders. Some lenders are offering more than 0.9 per cent off their standard variable rate for borrowers who ask.
“Keep in mind what it might cost you to switch though,” Boyd says. “While borrowers with new loans may no longer be liable for early exit fees (also called delayed establishment fees), people who took out their loan before July 1 last year could still be charged an exit fee by their lender. The ban on exit fees only applies to loans taken out since July 1, 2011. There are also other costs associated with refinancing such as government charges to discharge and register a mortgage.”
However, securing a cheaper rate cut from another institution may mean you can recoup the amount you have to spend to refinance quite quickly, or you may be able to use the cheaper offer to negotiate a better deal with your existing lender.