WITH interest rates on the move in 2025 – and economists tipping a RBA rate reduction this Tuesday (May 20) – Whitsunday homeowners are hopeful about potential future savings on their mortgage repayments.
But to truly benefit, it’s essential to understand how your current interest rate affects your loan — and what options are available, if it’s time to explore a better deal.
Why interest rates matter?
Interest rates have a direct impact on your mortgage repayments and the total cost over the life of the loan.
Even a small change can add or save thousands of dollars over the life of a home loan. That’s why it’s so important to stay on top of your current rate, whether you’re a first-time buyer or a seasoned property owner.
Knowing your current rate and keeping an eye on market trends is essential to make confident decisions, like locking in a new loan or refinancing to a more competitive rate.
What influences interest rates?
Interest rate percentages are based on a number of factors – the Reserve Bank of Australia (RBA), the cost of money on overseas markets, and the general state of the economy.
Interest rates don’t appear to move by much when looked at as a simple number, sometimes only a fraction of a per cent, but each basis point makes a significant difference to the total cost of a loan, and makes a big difference when you’re working to pay down your mortgage.
Fixed or Variable?
When choosing a home loan, one of the key decisions you’ll make is whether to go with a fixed or variable interest rate — or a mix of both.
- A fixed rate means your interest rate (and repayments) stay the same for a set period, usually between one and five years. This option gives you certainty and consistency, making it easier to plan your budget. It does have some downsides though, such as large costs to break the loan, should your circumstances change and you decide to sell the property during the fixed term. You may also have limited features such as being unable to make extra repayments, no offset or redraw.
- A variable rate can go up or down over time, depending on the market and decisions made by your lender or the RBA. While this means your repayments might fluctuate, it also gives you the potential to benefit if rates drop, as well as flexibility to use other features such as offset and redraw.
Some borrowers also choose to split their loan — fixing part of it for stability, while leaving the rest variable for flexibility.
Not sure which option suits you best? That’s where your mortgage broker can help guide you, based on your personal goals and the current market outlook.
Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product. Credit Representative 522752 is authorised under Australian Credit Licence 389328.
