COMMONWEALTH Bank home loans General Manager Clive Van Horen says he’s seen an increase in borrowers making the most of the 75 basis-point drop in interest rates.
“An increased proportion of customers are ahead in their repayments” Van Horen says. “That figure has increased and it’s probably closer to 80 per cent who are ahead of their minimum repayments”
He also says that paying off debt as fast as possible has become increasingly popular among borrowers in recent years and the current European situation is only going to reinforce the same sort of customer behaviour”
“When the interest rate goes down and you keep your repayment amount the same … you are therefore paying off more of the principal and capital portion of the debt.”
For example, a borrower with the average $300,000 mortgage has an additional $47 a month in their pockets following the recent rate cuts. If they pour the entire amount straight into their mortgage they will shave 16 months off the term of the loan.
Overall, there was a general increase in prepayment levels since 2008, with a greater number of accounts well in advance of their repayment schedule.”
This is definitely the way to go if you are able to do so.
