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In a surprise move for both existing and aspiring property owners, the Reserve Bank of Australia (RBA) raised the official cash rate yesterday by 25 basis points, pushing the cost of borrowing up, yet again.
Financial markets were pricing in a 20 per cent chance of a rise in the cash rate on Melbourne Cup Day, but the RBA surprised the nation by lifting the cash rate up to 4.75 per cent when the clock hit 2.30pm.
A 0.25 per cent rise in interest rates will add around $50 a month to the average home loan repayments.
But if the news that the official cash rate had increased wasn’t bad enough, it appears the banks are preparing to lift home loan rates over and above the RBA’s.
The Commonwealth Bank announced yesterday that it would increase its standard variable rate (SVR) by 0.45 per cent – nearly double the RBA’s rise – as a result of funding pressures. And expectations are that the other major banks will follow suit.
The good news for aspiring property buyers is that there is still time to choose an alternative to the big banks.
While the majors such as Commonwealth Bank and Westpac may be front of mind for a lot of us, there are other lenders to choose from.
Credit unions and building societies, as well as non-bank lenders and the smaller banks, are all working hard to bring more competitive offers to the market, and borrowers looking for a better rate should shop around before simply sticking with their bank.
Just a quick glance at Canstar Cannex reveals a load of lenders offering SVRs well below the major banks’.
The Commonwealth Bank’s SVR now sits at 7.81 per cent. Heritage Building Society is offering a SVR of 7.05 per cent, LJ Hooker Home Loans’ SVR is sitting at 6.65 and Collins Home Loans is offering 6.55 per cent. And these are just a handful of examples.
So if you’re in the market for a home loan, look outside the square and you might just find yourself a better deal.