At its December 2011 meeting the RBA Board approved a 0.25% reduction in the official cash rate taking it to 4.25%. This is the second drop in interest rates in two meetings after the 0.25% cut on Melbourne Cup Day. Whilst it’s too early to call this a trend, it’s no doubt a welcome relief to mortgage holders across the country and the retail sector who are looking for a boost before Christmas.
For those with a mortgage of $300,000 this reduces repayments by around $50 per month. Combined with last month’s interest rate reduction, you’re almost $100 better off over the year.
For those who can afford it, keeping repayments at the previous level (ie paying $100 more than you now need to) could reduce up to 3 years off the mortgage and more importantly, save about $46,000 in interest payments. Worth considering.
However, for those who rely on interest earnings for their income – such as retirees, this isn’t such good news and with global financial markets remaining volatile, investors in equity and property markets alike need to keep their eye on the ball and remain focussed on their goals.
For either group, as competition between the big 4 banks and second tier players (Credit Unions, Building Societies etc) heat up, it’s a great time to be shopping around for the best deal.
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