Interest Rate Drops – What They Really Mean

The latest interest rate drop brings us the lowest rates in 40 years. But what do they really mean?

To put the drops into some perspective, consider the following scenario.

I f you had borrowed $300,000 2 years ago, then at the highest common rate of the day you would have been paying $2,321.64 at a rate of 8.57%. Today the same loan could be funded at about 5.2%, meaning the same loan would have a required monthly payment of $1647.33.

That’s a saving of $674 per month.

Over the remaining term of the loan, say 27 years, that would result in total savings of $674 per month.

A whopping $218,376!

Alternatively if you maintain the original, higher, repayment the loan term would reduce to just under 16 years.

Almost half the original term!

If that’s not something to cheer about I don’t know what is.

What’s more, first home buyers can get:

• Generous reductions/exemptions on Stamp Duties.
• Generous handouts from the First Home Owners Grant up to $21,000.
• The lowest interest rates in 40 years.
• Banks busting to loan the money.

I have never seen a better time to enter the home ownership market.

Tagged as: Financial services, Interest rate, Loan, Mortgage, Personal Finance