Mortgage Choice is looking forward to seeing mortgage interest rates drop further now that the Reserve Bank of Australia has reduced the cash rate by 0.75% to 5.25%. The last time the cash rate hit that level was December 2003.

The move will surely be welcomed by Australian mortgage holders, many of who have been waiting a long time to see rates decrease significantly.

It is bound to also be welcomed by those looking to take out a mortgage, as it will provide them with a broader price range to consider when hunting for a property.

If lenders match the drop - which is likely given the recent improvement in their financial market conditions - borrowers with variable rate loans will be cheering loudly. With a mortgage rate cut of 0.75%, a borrower previously owing $250,000 at 8.8% over a 25-year term will save around $130 per month on their repayments.

Mortgage Choice Senior Corporate Affairs Manager, Kristy Sheppard said, “The cash rate reduction is fantastic news for all borrowers as it should result in them having a little more room to move in their budget”.

“However, they should consider keeping their mortgage repayments at a higher level than necessary because a little goes a long way! If someone owing $250,000 at 8.8% over a 25-year term ignored the rate cut and continued repaying at the same level, they would save over $66,000 in interest plus four years and three months off the loan term”.

“I’m sure the Reserve Bank decision has also encouraged positivity among those looking to buy a property, as they can widen their scope on the property they can afford to buy”.

Mortgage Choice has these quick tips for those looking to buy a home:

1. Research research research - the property market in each area being considered and overall, the ‘ideal’ properties in mind, different mortgages and repayment strategies;
2. Consider applying for a loan pre-approval, to get a good idea of what price range should be contemplated;
3. Take time when choosing a suitable loan;
4. Consider ignoring the loan’s ‘honeymoon period’ and get ahead from the beginning, by repaying at a higher level than necessary;
5. Keep in mind that very few people can afford to buy their ideal property with their first purchase.

“A number of reputable mortgage brokers such as Mortgage Choice offer free home loan eligibility checks, which means they check your financial situation and needs against a wide range of others from a panel of lending institutions. It’s worth a quick visit to make sure you’re doing the best thing by your budget,” Ms Sheppard said.

Visit www.mortgagechoice.com.au or call 13 MORTGAGE.