Mortgage holders who are in “survival” mode could save up to $60,000 on their home loan with one simple trick. While experts predict the RBA’s rate hike cycle is close to over, many mortgage holders are still feeling the pressure of rate rises in 2023.
An analysis from financial comparison site Mozo shows borrowers could save tens of thousands of dollars on lowest interest rates by double checking their loan to value ratios (LVR).
Mozo’s money expert Rachel Wastell said Australians would still need to combat an extended period of high interest rates. Knowing your loan to value ratio could significantly decrease your loan, according to Mozo.
“The RBA may start cutting the cash rate later this year, but it’s unlikely we’ll get back to those ultra-low interest rates starting with 1 or 2 we saw during Covid in the near future,” she said. “In fact, they may never return at all.”
If borrowers can’t afford to refinance, checking their LVR is another way they could shave tens of thousands of dollars in interest off their loan. “The loan to value ratio is essentially how much you owe in comparison to how much your property is worth and that borrowed amount influences interest rates as the lower the LVR, the less risky you become in the eyes of the banks,” Ms Wastell said.
Rate cuts may be coming, but mortgage holders may still have to combat their high rates for a while, Ms Wastell said. Some lenders can offer lower interest rates for lower LVR tiers, according to the Mozo analysis which is the equivalent of up to a whopping $61,904 difference in interest over a 25 year loan term.
“If you have a low LVR, finding these LVR specific rates from lenders can really help you save a significant amount of interest over the course of your loan,” Ms Wastell added.
Mozo have revealed the lowest home loan rate on their database, which is a variable rate of 5.96 per cent with The Capricornian. According to the Mozo database there are currently 25 lenders offering rates starting with 5, 85 lenders offering rates starting with 6, 62 lenders offering rates starting with 7, and 39 lenders offering rates over 8 per cent.
“As little as half a percent difference in interest rates could mean a difference of tens of thousands of dollars in interest over the life of your loan,” Ms Wastell said.
