Homebuyers more likely to pay off loan quicker:industry
02 Dec 2008 4:19 PM
CANBERRA, Dec 2 AAP - Borrowers are more likely to continue making higher monthly repayments on their home loan rather then spend any savings from an interest rate cut, the mortgage industry says.
The Commonwealth Bank has passed on in full the Reserve Bank's one percentage point cut in official interest rates, taking its variable mortgage rate from now 7.74 per cent to 6.74 per cent.
The cut will save its customers $193 a month in repayments on an average mortgage of $300,000.
"Unless they are experiencing financial difficulty, mortgage holders prefer to continue making higher loan repayments so they can pay off their debt sooner rather than later," Mortgage and Finance Association of Australia (MFAA) chief executive Phil Naylor said in a statement.
"Evidence so far from our research shows that anywhere from two thirds to three quarters of mortgage holders still prefer to make higher repayments with the aim to pay off their mortgage quicker."
He said future rate cuts will depend on the RBA's assessment of the economy and how effective the last few drastic interest rate adjustments have been.
"The difficulty the Reserve has is that the decision made today may take a month or even six weeks before its impact on the economy is able to be assessed," Mr Naylor said.
