Drop in Variable Interest Rates Presents as an Opportunity to Pay Off Mortgage Sooner

Date: 06/09/2011

Mortgage House, major non bank lender, has recently slashed fixed interest rates and predict that variable interest rates are next to follow.

The majority of Australian home-owners with a mortgage have a variable component to their home loan and may be in for good news when it comes to their repayment amount. Mortgage House CEO, Ken Sayer is predicting a rate drop at the next RBA meeting of no less than 25 basis points.

Of the prediction, CEO Ken Sayer commented:

"A drop in interest rates presents an excellent opportunity to pay off your home loan sooner without impacting on your lifestyle or cash flow. Simply, by asking your lender to maintain the repayments at the current level and not reducing them when the rate drops, you are effectively paying down more of the principal.

This will result in a reduction in the amount of interest you pay and shorten the term of your loan. We have mortgage calculators on our website which detail the amount of interest and time you can save on your mortgage by maintaining your current repayment amount."

Based on a scenario of a $300,000 loan at 7% p.a. over 30 years and a rate drop of just 25 basis points, the customer can reduce their loan term by 2 years and 2 months whilst saving over $41,000 in interest, just by keeping the repayment amount at the higher interest rate.

It is important to note that lenders will automatically change the repayment amount in line with changes in interest rate, after providing written notice to the customer.

Managing Director, Sarah Roberts commented:

"When a rate change occurs, repayments on a variable loan are automatically adjusted to correspond with the new interest rate. In order to use maximise the benefits of an interest rate reduction, we encourage customers to speak with their lender and formally request to maintain their current repayment amount."

With over 25 years in operation, Mortgage House is a home loan lender in its own right and has also retained its mortgage management and broking capabilities. The group has over 50 branches nationwide and also offers its range of products through a network of accredited brokers.