Australian homeowners are likely to stash their savings rather than spend them after a widely expected RBA rate cut next week. Compare the Market research showed it will boost savings or offset accounts.
Economists tip that the Reserve Bank’s rate cut, set to be announced on 20 May, points to a 0.25% interest rate cut, leading to further competition between lenders who are cutting fixed rates in anticipation.
With a 0.25% rate cut, a borrower with a loan of A$666,000 would pocket around $100 a month or more than $1,200 a year.
According to Compare the Market Economic Director, David Koch, this is good news for homeowners hoping to bolster their savings following an interest rate hold at April’s RBA board meeting.
“It’s highly likely that we’ll see some sort of interest rate cut this month. This is fantastic news for the 29% of Aussie homeowners who told us they’d use the extra money to get their savings back into the green,” Koch said.
“If you’ve weathered the previous rate hikes and your budget is still in pretty good shape, it’s not a bad idea to keep your repayments the same, even when your lender passes on rate cuts.
“About 27% of homeowners told us they would use this strategy to pay down their loan faster.”
Koch also suggested that now is a great time to consider refinancing, especially if your current lender tells you they can’t match other competitive deals available.
“Time and time again, we see some of the best offers reserved for new customers, so ensure your loyalty isn’t costing you,” he said.
This is because there are “fantastic” cashback offers coming up, according to Koch.
“You can essentially lock in a better interest rate and pocket some extra cash,” he said.
“Just double-check any applicable fees you may incur to switch lenders, as you don’t want them to gobble your savings up.”
Compare the Market’s survey also found that around one in five homeowners would put extra money into an offset account.
Koch said an offset account can be a great asset if used correctly to help pay less for a home loan.
“Whatever amount of money is in your offset account is subtracted from your home loan balance each month,” he said.
“The more money you have in an offset account, the less you’ll pay in interest on your home loan.
“But remember there are fees associated with offset accounts, so ensure the savings outweigh these costs.”
