Australia’s Big Four banks are intensifying efforts to reclaim market share from mortgage brokers. With brokers now facilitating over 76% of new home loans, banks are pivoting towards direct-to-consumer strategies to regain control over the lending process.
Amongst other things, banks are investing in artificial intelligence to streamline loan processing and enhance customer experiences. By automating administrative tasks and improving service efficiency, they seek to offer faster approvals and personalised solutions – which is exactly what brokers do for their clients.
According to a Roy Morgan report, the banking industry ranks 22nd out of 26 industries in terms of trustworthiness among Australians, so try as they may, the odds are against banks dragging borrowers away from the unbiased, personalised service of mortgage brokers.
Did you know that if used carefully, a credit card can actually help a person pay off their mortgage sooner? It seems couter-intuitive, but in this week’s newsletter, we look at how this can be the case.
When used strategically, the interest-free period on a credit card can help reduce the length of your home loan and save you thousands in interest.
Here’s how it works.
Most credit cards offer an interest-free period—typically up to 44 or 55 days—on purchases. During this time, you won’t be charged any interest, provided you pay off the full closing balance by the due date. This feature can be cleverly combined with a home loan offset account to maximise the money working in your favour.
Instead of paying for day-to-day expenses directly from your transaction account, you can use your credit card to cover your regular spending like groceries, fuel, bills within the interest-free period. Meanwhile, your salary and savings remain in your offset account for longer, reducing the interest charged on your home loan. Every extra dollar in your offset account reduces the loan balance on which interest is calculated.
When your credit card bill is due, you pay it off in full using funds from your offset account, avoiding any credit card interest charges. Over time, this strategy keeps your mortgage interest down and can reduce the overall term of your loan, shaving months or even years off your repayments.
Handle with care.
However, this method requires discipline. You must always pay off your credit card in full before the interest-free period ends. Missing a payment or carrying a balance could erase the benefits and cost more in the long run.
Used wisely, leveraging your credit card’s interest-free days in conjunction with an offset account is a smart, simple strategy to help you pay off your home loan faster. It doesn’t require earning more, just making better use of what you already have.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
