Read the headlines regarding today’s interest rate cut and you’ll see that on an average mortgage of $300,000, you’ll be saving $46 per month. However by doing very little you can turn this into a saving of over $37,000.
If you’ve taken out a mortgage of $300,000 over 30 years and are making only the minimum repayments then it’s going to take 30 years to pay it off. And your bank will love you! So if you reduce your repayments in line with the 0.25% cut you’ll be paying $46 less per month.
However if you maintain the same repayments on a $300,000 mortgage you can cut 2 years and 3 months off your loan and reduce your total interest bill over 30 years by $37,300.
That’s a great reason to ignore the rate cut and pay the same off as last month.
Note: Based on an interest rate of 7.25% dropped to 7.0%.