Mortgage rates fall to 2.29 per cent
Mortgage customers need to be checking their interest rates now to ensure they are not paying too much as months of economic uncertainty remain.
The central bank, the Reserve Bank of Australia, slashed the cut rate for the second time this month to a record low of 0.25 per cent, delivering borrowers more relief.
But most lenders are still deciding exactly what savings will be given to customers and in what form.
Speculation has swirled around the possibility of interest repayment holidays or even the pausing of home loan repayments for those in dire financial circumstances.
Reserve Bank of Australia Governor Dr Philip Lowe said the nation was facing "extraordinary and challenging times" amid the COVID-19 pandemic.
As a result the RBA introduced a range of measures to make borrowing cheaper for banks and in turn would deliver customers rock-bottom deals.
Home Loan Experts' managing director Otto Dargan said for many borrowers it remained to be seen if they could financially survive through the coming months.
"The banks are under funding pressure to not pass on the cut. However they are also under political pressure to help borrowers," he said.
"Borrowers should talk to their employer now and if they may lose their income then talk to their lender now about hardship provisions or their mortgage broker about releasing equity in preparation."
At the time of publication the Commonwealth Bank had the cheapest loan rate available on the market - one, two and three-year fixed rates loans were reduced to just 2.29 per cent.
But in a surprise move, CBA said it would automatically reduce variable borrowers' repayments to the minimum amount from May 1.
The bank's chief executive officer Matt Comyn said this would "release up to $400 per month for customers and create up to $3.6 billion in additional cash support for the economy".
Customers can opt out after the change is introduced if they want to keep their repayments at the same level as now.
Financial comparison site RateCity's calculations showed on a $300,000 30-year owner occupier mortgage paying principal and interest the average existing big four discounted variable rate is 3.61 per cent.
If the 0.25 percentage point cut is passed on by lenders it would deliver savings of $42 a month and more than $500 a year.
The site's spokeswoman Sally Tindall said for customers who wanted to stay ahead of their home loans this move by CBA could "slow them down".
"Some banks may choose not to pass on the full rate cut but they are remaining competitive for new customers," she said.
"Now is a great time to get your finances in order while you can."
But she issued a stern word of warning to all borrowers.
"Get your finances in order now because you don't know what's down the track," Ms Tindall said.
Realstate.com.au's chief economist Nerida Conisbee urged mortgage customers to take it "day by day".
"There is so much uncertainty at the moment and having lower mortgage repayments is good news for most people," she said.
Originally published as Mortgage rates fall to 2.29 per cent