Majority of borrowers saving for major goals could have dreams dashed if rate relief delayed until 2025, Canstar warns
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New research from Canstar, Australia’s biggest financial comparison site, has found that 78% of borrowers are currently saving towards a major goal, with travel and holidays topping the list, followed by building an emergency fund and home renovations.
However, these dreams could be at risk if interest rate relief is prolonged until 2025 and borrowers don’t take a DIY approach to making savings on their home loan, according to Canstar.
Last week, ANZ broke with the pack of big banks by pushing its forecast for the first cash rate cut in the current cycle from November this year to February 2025.
Canstar’s analysis shows that prolonging the rate relief until February 2025 could see a borrower repaying a $600,000 home loan over 30 years pay an extra $288 towards their loan repayments between now and then, based on the average owner-occupied variable rate of 6.38%.
“Savings goals don’t have to be dashed if a rate cut is pushed back until 2025 but borrowers need to be open to a little DIY rate relief,” said Canstar’s finance expert, Steve Mickenbecker.
He noted that there was a slight 1.7% increase in the volume of loans refinanced to new lenders over the month in the latest Lending Indicators data from the ABS, and encouraged borrowers to take advantage of the ease of switching to get a better rate.
“Before making the move to a new lender, it’s always a good idea to put pressure on your existing lender. Reference owner occupied ongoing variable rates listed on Canstar.com.au as low as 5.75 percent as the starting point in your negotiations,” Mr Mickenbecker said.
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“Switching from a rate of 6.38 percent down to 5.75 percent has the potential to cut repayments by as much as $244 per month for a $600,000 loan over 30 years,” he said.
“This kind of saving between now and February could make a world of difference to anyone saving for a well-overdue family holiday, essential emergency funds or much-needed home renovations, among other savings goals.”
The Canstar survey of over 2,200 Australian borrowers was conducted online in June 2024.