Recent data from the Commonwealth Bank reveals that most mortgage holders opted not to lower their home loan direct debit payments following a cut in interest rates by the Reserve Bank of Australia (RBA) in February. The RBA reduced rates by 0.25 per cent, which could have resulted in savings of up to $80 per month for an average home loan of $500,000. However, only 14 per cent of eligible Commonwealth Bank customers chose to reduce their repayments, leaving the majority amounts unchanged.
Dr Michael Baumann, the Executive General Manager for Home Buying at Commonwealth Bank, noted that those who didn’t decrease their direct debit payments might be making extra repayments instead. This strategy could help them pay off their mortgages more swiftly. Furthermore, making additional repayments can enhance the available balance on their loan accounts, allowing customers the flexibility to redraw funds if faced with unexpected expenses.
Dr Baumann anticipates an increase in consumers leveraging further interest rate cuts to lower repayments and improve cash flow. He suggested that if rates continue to drop, there will likely be a greater number of home loan customers taking advantage of this opportunity to ease their financial situation by adjusting their regular mortgage payments.
The RBA’s upcoming meeting will soon yield its next decision regarding the cash rate, potentially influencing future homeowner decisions regarding their mortgage repayments.