When Was the Interest Rate on Your Home Loan Last Cut?

Although the official cash rate has dropped multiple times since Jan 2020, your mortgage may not have been so lucky. The Reserve Bank’s rate cuts aren’t the only factor that lenders consider when reviewing the interest rates on home loans. Whether they pass on the reduction in part, in full, or at all, is partially dependent on their fluctuating funding costs.

As a borrower faced with the added costs of the festive season, now is the time to find out where the interest rate on your mortgage sits. After all, lower interest rates mean lower repayments. 

Considering the cash rate is at a record low of 0.10%, you would hope the rate on your home loan is comparable with others on the market. Yellow Brick Road home loans, for example, are among the lowest on the market, with rates in the 1.0% and 2.0% range. If there’s a 3% interest rate, you’re paying too much.  

More rates than one

If you’re an existing home loan customer and you haven’t checked your interest rate in a while, you might be unpleasantly surprised as to how high it is. Lenders usually have different tiers of rates, with the lowest offered to new customers, specifically owner-occupiers paying off their principal and interest. The exact rates on offer will depend on factors like Loan to Value Ratio (LVR) and credit score.

• Useful reading: What Is Your Credit Score and What Affects It?

Home loans without the additional features of offset accounts and credit cards may also attract cheaper rates. Investors with interest-only mortgages are commonly on a higher rate tier.

It pays to know what interest rate you’re on because even small reductions equal large rewards. A 0.5% rate cut on a 30-year principal and interest home loan of $500,000 (fees excluded) would be $1,752 a year or $52,686 over the life of the loan [Source: YBR Loan Comparison Calculator].

How to get a better interest rate

Start by contacting your mortgage broker to find out out if they can match the current best offer on your variable interest rate. If you’re on a fixed rate, you may have to sit it out until your term finishes as breaking the contract may be cost-prohibitive.

If there’s no joy with your lender, consider refinancing your loan so you can take advantage of a better product elsewhere. Refinancing needn’t be a dreaded time-consuming chore if you get a qualified mortgage broker to help. Speak to a Yellow Brick Road mortgage broker, and we’ll do the leg work for you by quickly narrowing in on the home loan products most suitable to your needs. Our experienced brokers will advise you of the costs involved in refinancing and assist you with the home loan application.

• Useful reading: How to Get the Most Out of Refinancing

If you decide to go it alone, be careful of not applying with several different lenders at once. Rejected home loan applications are recorded on your credit file. Too many rejected applications in a short space of time can ring alarm bells for lenders and impact your credit rating. With our help, you can get your pre-approval application right the first time.