5 tips to obtaining a lower interest rate

Interest rate announcement – March 2017

Today the Reserve Bank of Australia met to review the official cash rate. After cutting rates in August last year, the RBA have decided again to leave rates on hold at 1.50% this month. We expect that most lenders will leave their rates unchanged, in line with the Reserve Bank’s decision.

5 tips for obtaining a lower interest rate

1. Fix the rate and term of your loan

Fixing the rate and term while rates are low, and before they start moving back upwards, can help you lock in a great deal and give some certainty of future repayments. It is also possible to split your loan and make part of your loan fixed and leave the other part variable. Note US interest rate rises are tipped in 2017.

2. Increase your repayments

Every extra dollar you put into your mortgage, above your required repayment amount, reduces the principal. This means down the track you’ll be paying interest on a smaller amount. This tactic will help you cut many years off the term of your loan. For example, on a $500,000 loan with an interest rate of 4.5% pa, being repaid over a 30 year period, extra repayments of $250 per month can reduce the term of the loan by 5 years.

3. Purchase an investment property

Although many lenders have recently tightened their lending criteria for investment loans, the affordability of new loans still can make it easier to get a loan for an investment property than for a home. If you have built up cash savings or equity in your own home it could be an ideal time to consider purchasing an investment property and accessing tax benefits.

4. Increase your loan facility limit

When rates are low, and you have built up equity in your home, it can be a good time to increase your loan facility limit to make extra cash available. This may allow you to invest in other investments such as shares.

5. Consolidate your debts

Interest rates on your credit cards and personal loans are much higher than the interest rate on your home loan. Many lenders will let you consolidate all your debt under the umbrella of your home loan. Using this approach, you can take advantage of the low home loan rates to pay off debts faster.