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With a rate cut decision being handed down this afternoon (20 May), borrowers are in a position to bolster finances.
According to the data from the major bank, 14 per cent of home loan customers reduced their home loan direct debit repayments following the February rate cut.
This decision meant more money in the pockets of borrowers as the cut reportedly equated to savings of $80 per month on an average loan size of $500,000.
The May rate call to be delivered later today is expected to result in another cut. If this trend persists, borrowers could once again secure some extra funds by shaving off mortgage repayments.
“Home owners appreciate the flexibility to make financial choices that suit their current and future goals and we offer eligible home loan customers the option to reduce their direct debit repayments or leave it untouched,” said CBA’s home buying executive general manager, Michael Baumann.
“Following February’s rate cut, around 14 per cent of eligible customers took this opportunity to reduce their direct debit to align with the lower repayment – thereby freeing up their current cash flow.”
Those who decided not to reduce direct debit repayments are also in a strong position as it means they’re paying off the mortgage faster, without sacrificing extra payment.
“These additional payments will also increase the available balance of their loan accounts and customers may have the flexibility to redraw the available balance at any time, for example if they experience an unexpected cost,” said Baumann.
“If rates fall further, it could deliver greater total savings to eligible home loan customers. As such, I wouldn’t be surprised to see more home loan customers choosing to free up their cash flow by lowering their regular mortgage repayments.”
Experts are predicting the Reserve Bank to further cut rates in today’s meeting.
As covered recently by Broker Daily, APAC economist at Indeed, Callam Pickering, believes the RBA will “need to cut rates steadily over the next few months” in response to ongoing geopolitical and economic uncertainty.
“The global economic outlook is suddenly much weaker, the US administration is unpredictable and unreliable, and while the direct impact of tariffs on Australia may be low, the indirect impact from weaker growth among our major trading partners may be quite large,” said Pickering.
“The RBA will look to support the economy via looser monetary policy and they should cut rates [today] and then again when they meet in early July.”
While the decision is never absolute, most are in agreement that rates will be cut at the May meeting.
Regardless, CBA said home loan customers don’t need to wait for cuts to alter direct debits on mortgage payments.
“They can make real-time adjustments in alignment with their unique and ever-evolving circumstances,” said Baumann.
Stay tuned in to Broker Daily to hear the RBA decision when it drops.
[Related: Workforce data unlikely to sway RBA from rate cut]
