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Dream of owning home still strong
Despite the incredible slashing of interest rates these past few months, the average Aussie's dream of owning their own home is stronger than even their Christmas wish list it seems.
The Mortgage and Finance Association of Australia (MFAA) has tipped that a lot of borrowers will continue to make higher mortgage repayments, regardless of the Reserve's latest 1.00% cut to the official cash interest rate.
"Unless they are experiencing financial difficulty, mortgage holders prefer to continue making higher loan repayments so they can pay off their debt sooner rather than later," Mr Phil Naylor, CEO of the MFAA said.
"Evidence so far from our research shows that anywhere from two thirds to three quarters of mortgage holders still prefer to make higher repayments with the aim to pay off their mortgage quicker.
"Obviously, borrowers that are experiencing more difficultly are using the money saved as a result of the drop in rates to cover their daily requirements," said Mr Naylor.
"The prospect of future cuts will depend on the Reserve's assessment of the economy and how effective the last few drastic interest rate adjustments have been. The difficulty the Reserve has is that the latest rate cut decision made may take a month or even six weeks before its impact on the economy is able to be assessed," Mr Naylor said.
| Average Loan Size* | Monthly principal and interest repayments before the latest RBA cut of 1% (in $'s) | Savings on monthly repayments after the latest RBA cut of 1% (in $'s) | |
| NSW | $271,600 | 2159.61 | 178.93 |
| VIC | $262,400 | 2086.46 | 172.88 |
| QLD | $274,000 | 2178.69 | 180.51 |
| WA | $273,200 | 2172.33 | 179.99 |
| SA | $217,600 | 1730.23 | 143.36 |
| TAS | $195,600 | 1555.30 | 128.86 |
| ACT | $270,700 | 2152.45 | 178.34 |
| NT | $261,100 | 2076.12 | 172.02 |
| National | $264,000 | 2099.18 | 173.93 |
Calculations based on a 25-year home loan.
* Figures of the average home loan size in each state provided by the ABS (Housing Finance Cat. 5609.0 Sept 2008). Based on home loans for the construction and purchase of new and established dwellings.
** Indicative rate for the present standard variable home loan (based on RBA Indicator Lending Rates - F5).
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