According to the latest news coming from various economists, there is the increasing likelihood that the Reserve Bank may announce another rate cut in early February. 

And this is more great news for many mortgage holders. 

After all, who wouldn’t love the thought of their repayments being reduced since last October by more than $150 per month on an average $300,000 standard variable loan take over thirty years, if the lender passes another .25% rate cut on in full.

To put this into perspective, let’s look at what $150 per month could offer an ‘average’ borrower:

1. If that money continues to be paid into the mortgage at your pre-November repayment level (providing your loan allows for this) it can potentially save you more than $90,000 in interest and pay the loan out considerably earlier. Definitely the preferred option to maximise the effect over the long term.
2. Outstanding debts – paying off a credit card or any other accrued debt can be an empowering move and allows you to then concentrate on reducing your mortgage as your sole financial obligation.
3. If the monthly savings are accumulated over a quarter, $450 may mean you can pay for some minor improvements to your property such as repairs, painting, landscaping or even a room makeover.
4. Energy bills/council rates/insurances– many families are not immune to these bills adding up to more than $450 per quarter so imagine being able to pay that bill and re-direct your efforts to pay down extra debt somewhere else.
5. Holidays – cumulatively, $150 per month adds up to $1800 over a year which is enough to pay for a holiday for one/two weeks depending on when/where you holiday and how many people are travelling. If the only holiday you can  currently is likely to go on your credit card, imagine paying for it in cash.

It’s not a matter of spending the money before you get it – because you already have the money.

The point is you need to see any mortgage relief for what it is – i.e. less pressure on your hip pocket, allowing you to re-allocate those funds and make your financial situation more effective.

Tags: affordability, Budget, Credit Cards, Debt, Interest Rates, variable rate

This entry was posted on Wednesday, January 25th, 2012 at 11:45 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.