The Barefoot Investor Scott Pape has urged Aussies to call their banks and ‘whine’ until they are given a better interest rate on their home loans.
Last week, the Reserve Bank eased the cash rate by 25 basis points to 4.1 per cent, noting that inflation had eased.
Commonwealth Bank and Westpac expect the Reserve Bank to cut interest rates three more times this year back to 3.35 per cent.
However, Mr Pape cautioned borrowers against those predictions.
‘Whenever you see a headline predicting interest rates, don’t bother reading the article,’ he said.
‘There’s a very good chance they’ll be wrong. Instead, use it as a reminder to check your current home loan rate – then call your bank and whine like my kids.’
Mr Pape referenced a chart tracking every interest rate decision stretching back to the nineties.
‘Now here’s what strikes me when I look at this historical chart: First, current interest rates don’t look that high.
‘Second, not one person on earth correctly called each rate change in real-time – and that includes the people setting them at the Reserve Bank.’
The Barefoot Investor Scott Pape urged Aussies to call their banks and ‘whine’ for a better deal on their current loans following the RBA’s decision to cut interest rates
Mr Pape referenced a chart tracking every interest rate decision stretching back to the nineties (pictured)
He added interest rate predictions should instead serve as a reminder for mortgage loan holders to check their current rate before pestering their bank for a better deal.
‘Use it as a reminder to check your current home loan rate – then call your bank and whine like my kids,’ Mr Pape wrote.
‘Remember, there are only two ways to pay off your mortgage quicker: make extra repayments, and lower your interest rate.
‘Right now the best rates are a smidge under 6 per cent for online lenders like Unloan, which is CommBank’s Jetstar brand. Use that as the basis of the negotiation.
He also offered some advice for those struggling to pay their mortgage.
‘If you’re barely holding on, here’s my advice: Panic Early. Make the hard decisions now. Whatever you do, create a realistic plan and begin working on it.’
The interest rate cut was a welcome reprieve for Aussies struggling with the cost of living as the RBA had previously hiked rates 13 times in 18 months in 2022 and 2023.
Within half an hour of the RBA rate cut decision, Australia’s Big Four banks all announced they would be cutting variable rates to reflect the quarter of a percentage point reduction in the RBA cash rate.
Financial markets are anticipating another three rate cuts across 2025 and 2026, however the RBA Governor Michele Bullock (pictured) believed the prediction was premature
This means a borrower with an average $600,000 variable loan would see their repayments fall $92 a month or $1,104 a year as a result of the rate cut.
However, Ms Bullock declared the fight against inflation was far from over, and cautioned borrowers against expecting more rate cuts in 2025.
‘We cannot declare victory on inflation just yet,’ Ms Bullock said.
‘If we don’t get inflation down, then interest rates won’t come down, and you’ll be stuck with inflation and high interest rates.
‘So, we have to be patient. I understand it hurts. But it’s really important that we get inflation down.’