Donít Take a Mortgage Interest Rate Rise Without a Fight

By: David Nalin


More than likely if you have a Standard Variable Rate Mortgage you face at least a $50 monthly repayment increase. Whenever the Reserve Bank opts for an increase in the official Cash Rate, you will need to, more than likely, look for additional similar increases in the ensuing months.

Itís the Lenderís Call
It is ultimately your lenderís call whether this gives them the green light to increase your home finance mortgage rate. The going belief most variable mortgage rates loan owners possess is that lenders will pass on rate changes to borrowers regardless. However, recent examinations show that only 41 percent of loans carrying a variable rate have had a lender response raising the rate. This same examination points that 88 percent of home mortgage lenders that are banks have adjusted rates. Thirty-six percent of Credit Unions and Building Societies have raised rates while 23 percent of non-bank lenders raised rates.

Did You Get Stuck?
You might get passed the fury from lenders to raise mortgage rates and you may not. Remember when the RBA dropped rates about a year ago? Most lenders never passed the total availability in a dropped variable rate to borrowers. Lenders lined up with a myriad of explanations explaining that their real cost for managing loans is at a premium. Therefore, even when the RBA lowers rates by 4.25 percent, the effective rate you finally realize decreased by only 3.84 percent (the national average).

No the Same Line of Thinking
Wouldnít you think that lenders would only raise rates a portion that is lower than the announced RBA rate? Why then are variable mortgage holders forced to hand back that same rate margin affected by last yearís decrease. Whatís going on?

So Whatís a Body to Do?
This information recalls one of the fundamental lessons everyone should re-learn: Do not put your loan accounts up on a high shelf in a hallway closet. In a world of fluctuating rates spurning unpredictable lender activity, you need to stay current concerning the effect upon your personal finances. You need to be shopping about for a better deal. This is a very good period producing a competitive lending atmosphere where there are more than 700 home mortgage products available. Any Australian who puts this knowledge to task should benefit nicely getting lenders to compete for the business. Plus, if you have traditionally dealt with banks, now is a good time to consider alternative lending institutions. The same requirements Ė and restrictions Ė apply to all home mortgage lenders. Although many people believe re-financing a home mortgage is costly and inconvenient, simply reducing your interest rate by a quarter percent can save $15,000 on an average home loan. Even considering any loan fees added to the mix, you may come out much better than just sitting there taking what they dish out. Or, you might want to look into the benefits of a fixed mortgage.

Consider at least approaching your current lender to demand a more favourable deal using the going market rates as ammunition for the requested change. Fight back for a better financial you!

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