Interest rate report #4 - 9th July '24

Here is your monthly interest rate report.

This gives you a quick, plain English update on interest rates.

No fluff. Just simple facts to help you decide what to do with your mortgage.

How are interest rates changing?

A few banks dropped their interest rates over the last month:

• Westpac dropped their 6-month, 1-year and 18-month rates at the end of June
• TSB dropped their 1-year rate from 7.14% to 6.99%

Not huge drops. These banks are just following the other big lenders to meet the market.

It’s not a sign that we’re about to get a fresh round of interest rate cuts in the next few weeks.

You can see all the latest interest rate changes here.

How much can I negotiate off my interest rate?

Here are the discounts my team at Opes Mortgages is negotiating off the bank’s interest rates.

This gives you a sense of the discount you might be able to get.

The biggest discounts are still on the 1-year and 6-month rates.

The average bank is advertising 7.09% for the 1-year rate.

But, most are discounting that to 6.86%. That’s a 0.23% discount.

That’ll save $18 a week on a standard $500k mortgage. That’s $965 saved over a year.

Here are all the discounts my mortgage brokers are negotiating:

Is it worth switching banks to get a better rate?

I’ve also been asked if it’s worth switching banks to get a cheaper interest rate.

Often, it’s hard for borrowers to figure this out. After all, the banks don’t advertise their discounted rates.

So, I’ve run the numbers to see how much you could save on a $500k mortgage.

Here's what you'd save when moving from the bank with the highest rate to the bank with the lowest rate.

There is almost no difference with banks when it comes to the 1-year rate.

If you moved from the most expensive bank to the cheapest bank, you’d only save $3 a week. That’s $160 a year.                                                   

There’s more of a difference with the 3-year rate. The most expensive bank charges 6.65%. Whereas the cheapest bank charges 6.39%.

So, moving from the expensive bank to the cheaper bank would save $23.50 a week. That’s $1,222 a year.

Of course, there are costs to moving banks. So, have a chat with your mortgage adviser.

Or, hit reply if you want to work with me and my team. It’d be great to talk.

Are banks being tougher when looking at my mortgage application?

No change here. The servicing test rates haven’t moved at all. Read more about this here.

What to look out for this month

The Reserve Bank will review and release the OCR tomorrow.

It will probably stay at 5.5%. That’s almost certain.

As usual, the real action will be in the forecasts:

• Does the Reserve Bank think inflation will fall faster or slower than 3 months ago?
• Do they plan to bring the OCR down faster?
• Is there any talk of raising the OCR (like there was last time)?
• Or will they rule out the possibility of another hike?

My colleague, Andrew, will dig into the forecasts in his newsletter (out on Thursday). Look out for it – it’s called Private Property.

And watch out for the big one. New inflation data comes next week (17th July).

If inflation falls to 3.6% (or below), that’s a good sign for interest rates.

And if you need help with your mortgage, hit reply and let me know your situation. I’ll come right back to you.

Talk to you again next month,

Pete