If National Australia Bank (NAB) CEO Andrew Irvine and his team of experts are to be believed, mortgage holders are tipped to get quite a bit relief this year, starting with a hefty rate cut later this month.
They’re not alone in predicting a rate cut this month with Westpac stating last week that a rate cut in May was almost guaranteed, but NAB’s predictions take the good news a few steps further.
NAB economist Sally Auld on Tuesday said that the RBA would cut the cash rate by 50 basis points in May, followed by 25 basis point cuts in July, August, November and February.
Why are they so bullish? They claim the central bank needs to “catch up” with recent global developments. This would take the cash rate down to 2.6 per cent and shave an estimated $526 off monthly repayments for the average $600,000 loan. Wouldn’t that be outstanding!
This year, I’m running a marathon in memory of a man who meant so much to someone close to me — my dear friend’s father, who recently lost his battle with cancer. Having lost my own father at a young age, this cause touches me on a deeply personal level.
I’m dedicating every kilometre of this run to the memory of both of them, and to all the families who have faced the pain of cancer.
I’m also raising funds to support cancer research and provide care for those currently fighting this disease. If you’re able, please consider donating – every contribution makes a difference.
Let’s turn loss into impact. Thank you for your support. 💛
Should you wish to donate, you can do so via this link –
https://lnkd.in/g6qaQsMJ
In this week’s newsletter, we look at the impact on home loan repayments should NAB’s predictions prove to be correct.
With interest rates beginning to soften, many mortgage holders are wondering: how much could I actually save if rates fell steadily?
Let’s break it down.
Assume you have a $600,000 principal and interest loan over 30 years at a current interest rate of 5.89%. Your monthly repayment is approximately $3,559.
If the Reserve Bank (and lenders) were to drop rates by five successive 0.25% cuts, bringing the rate down to 4.64%, your monthly repayment would fall to around $3,094.
That’s a saving of $464 per month, or $5,577 per year—and over five years, that adds up to nearly $27,000 in reduced repayments.
Here’s a breakdown of the savings:
- Starting Rate (5.89%): $3,559/month
- After 1 cut (5.64%): $3,469/month
- After 2 cuts (5.39%): $3,380/month
- After 3 cuts (5.14%): $3,293/month
- After 4 cuts (4.89%): $3,208/month
- After 5 cuts (4.64%): $3,094/month
Whether borrowers pocket the savings or keep repayments at the current level to pay off your loan faster, rate cuts can deliver real financial breathing room.
For homeowners, especially those with large loan balances, now may be the time to reassess their rate, compare lenders, or prepare to take advantage of any future cash rate drops.
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.
