PHOTO: Low interest rates are among the tools available to help borrowers. Photo credit: Getty.
With the Official Cash Rate down to 0.25 percent in an attempt to stabilise the economy as a result of coronavirus, borrowers are in the box seat to pay off debt at minimal cost.
Banks moved quickly to announce their intention to pass on the full benefit of Monday’s cut, but according to Squirrel chief executive John Bolton, around 80 percent of homeowners won’t see an immediate result.
“Fixed rates won’t drop as much as floating rates: most people will be on one and two-year fixed rates [meaning] they’ll have to camp out and wait,” Bolton said.
As it costs money to break fixed rates – and the Reserve Bank has signalled that the rate cut will be in place for at least 12 months – in general, breaking an existing loan to get onto a lower rate is unlikely to provide much benefit.
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