Sneaky bank trick: How to make sure you get the full RBA rate cut
Some lenders are quietly helping you repay your home loan faster—whether you like it or not!
Last week the Reserve Bank gave Australian borrowers a second rate cut for the year.
Variable rate home loans for most borrowers are now 50 basis points lower than they were in January.
And almost every lender has announced they're passing on the cut. Wonderful news.
But you should take a very close look at your next home loan statement anyway.
There's a chance your lender could lower your rate but keep your monthly repayments the same.
Some banks don't lower your repayments by default. Instead they keep your repayments the same while lowering your interest rate.
In effect this means you get charged less interest and pay off more of your loan principal each month.
Want a cheaper home loan?
There's never a bad time to think about refinancing.
A few Australian redditors have reported this experience recently, as have several Finder staff members.
"This practice is not widespread," says mortgage broker Joseph Daoud. "Banks will make more money the longer your loan is with them."
And this practice is by no means a bad thing for borrowers. "If you can afford to continue repayments at the higher rate you will be able to pay off your mortgage sooner!" says Daoud.
Accidentally making extra repayments could wipe years off your home loan and save you tens (even hundreds) of thousands in interest charges.
But it's still a good reminder to check your home loan statements regularly and look at what's really going on with your mortgage.
We're in the middle of a cost of living crisis, where 36% of Australians say they struggle to repay their home loans each month.
Many of us are banking on the RBA's rate cuts to bring down our loan repayments each month so we can make ends meet.
What should you do?
Lenders are still in the process of passing on the rate cut. Most borrowers won't see an impact on their monthly home loan statement until June.
Check your repayments and your interest rate and compare them to earlier statements.
If the rate is lower but the repayments are the same, then your lender is giving you a sneaky extra repayment.
Then it's up to you to decide if you want to keep paying the loan off faster or pocket the extra savings.
You can simply call your lender and ask them to adjust your repayments.
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