Most home loan customers are planning to use the latest reduction in interest rates to increase their mortgage repayments, a national survey has found.
The Priority Lending poll which asked “How will you take advantage of the May interest rate reduction?’ found 57 per cent said they would be using the extra money to boost their home loan repayments.
Priority Lending Corporate Spokesman Paul Smith said 21 per cent of the 856 online poll respondents said they would increase savings while 20 per cent said they would be looking to refinance.
Mr Smith said only two per cent of those surveyed said they would be spending the extra cash resulting from the interest rate reduction.
“The Reserve Bank of Australia reducing the cash rate this month by 50 basis points to 3.75 per cent was a welcome relief to borrowers even though most banks have not passed on the full rate cut,” he said.
“The results of our poll show that most customers will be using the extra money to increase their current home loan repayments.”
Mr Smith said that most lenders had passed on a large portion of the 50 basis points reduction and home loan customers could make significant progress on paying off their home loans with lower interest rates
“For consumers who have grown accustomed to conditions to make a repayment at a certain dollar value, a significant savings in time and money can be made if those consumers continue to pay the same amount at the lower interest rates,” he said.
Mr Smith said the rate cut was essential to revive struggling sectors such as retail and housing, with further action from the RBA expected.
“Another rate cut is on the cards for June with continuing concern about the economic situation in Europe,” he said.
Priority Lending survey results:
How will you take advantage of the May interest rate reduction?
Refinance Mortgage – 20%
Increase Mortgage Payments – 57%
Increase Savings – 21%
Increase Spending – 2%
Source: Priority Lending