Maintain current repayments

Noel Whittaker
Noel Whittaker

FALLING interest rates give borrowers a chance to shorten the term of their loan.

This is why I have always recommended that you maintain your current repayments whenever an interest rate cut is announced.

This is why I was surprised to read that a major Australian bank has received adverse publicity in the media for not notifying their borrowers that they had the option of reducing their repayments, now that the rate being charged on their loan had dropped.

The bank should have been commended, not criticised.

Keeping the payments at their present level does more than shorten the term of the loan - it also gives you a safety buffer if rates rise, or you find yourself in a tough financial situation because of unemployment or sickness.

Remember, even though interest rates appear to be in downtrend now, it is a fundamental principle that interest rates move in cycles.

There is no guarantee that interest rates in two years will not be higher than they are today.

A cut of .25% is worth about $5 a week for every $100,000 you owe. 

This is just $15 a week on a $300,000 mortgage. 

Surely that money is better reducing the principal, rather than going into your pocket, where it is almost certainly going to be frittered away.

Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is noel.whittaker@whittakermacnaught.com.au.
 

Topics:  noel whittaker



Local Real Estate

finda logo
Featured Real Estate
Waterfront Wonder $1,895,000
House 5 5 2
Step Inside - Surprise! $225,000
House 3 1 2
Original Radford... $175,000
House 2 1 1
“Accountant... $379,000...
House 4 2 2

Featured Jobs

finda logo

Ipswich jobs listed daily

Featured Jobs
Currey Flowers West Ipswich Casual PerHour
Cook/Commis Chef/Chef de... Aratula Full Time 50,000 - 56,000 PerAnnum
EARN CA$H! Distributors... EARN CA$H! Distributors needed. Earn while you walk. Drop & collect catalogues ...
Bobcat Excavator... Minden Full Time



Local Partners

Local Profile

Horoscopes

Virgo

Your dreams are vivid, and there may be some psychic experiences that will help you come to a conclusion over a problem. Trust your instincts.

read more

Marketplace

Special Offers & Promotions

Compare & Save