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RBA Rate Rises

By March 14, 2023News Articles

The rapidly rising interest rate environment that we’re experiencing, is presenting significant challenges to many borrowers across the spectrum. However, challenging the status quo with your current Bank has proven to provide significantly better outcomes when it comes to receiving a better deal on your loan.

Relying on your Bank’s loyalty or the Bank providing you the ‘best deal’, based on you being a long-term customer, has proved time and time again not to be the solution. In fact, statistics indicate that customers are significantly worse off remaining with their current bank and relying on the bank to review their existing loan facilities and provide a better deal.

PWS Advisory Group recently assisted a client who had been loyal to their bank for over 10 years. The bank provided no regular reviews of the client’s loan and due to this, the client was now paying 8.36% on their investment property loan.

Further, by working with the client and understanding the client’s goals and objectives for the property and their future retirement needs, it was identified that the client not only wanted to reduce the increasing interest rate burden, but they were also very concerned about having the loan in place after they retire. The client was hoping that the property’s rental income would contribute to their personal income stream after retirement and not be needed to service debt.

PWS Advisory Group, being true to our vision of “Improving personal wellbeing” researched the client’s options with their existing bank and our panel of funders.

After discussions with the client, we recommended to refinance their loan to a new funder with a rate of 5.89%, reducing the rate by 2.47% and saving the client $319 per month in interest or about $38,000 for the remaining loan term. The saving has now removed the need for them to contribute personal income to the investment loan and has instantly improved their mental and financial wellbeing.

As part of the refinance, PWS Advisory Group also restructured the clients’ loan term to align with their planned retirement age. The client no longer has to worry about the debt being a burden once they elect to retire.

This client’s experience highlighted the fact that Bank’s are more focused on attracting new customers than they are about looking after the interest and wellbeing of their existing customers.

With the RBA increasing interest rates by another 0.25%, and with the potential for a couple more rate rises this year, the importance of undertaking a review of your current loan and not relying on your Bank to provide you the ‘best deal’ is becoming ever more evident.

Over the last 9 rises, banks have mostly passed on the full rate rise to their existing loan book, with mortgage rates rising 3.5% since May 2022. However, due to competition for market share, the interest rates for new to bank loans (including refinance) are not increasing in line with their existing lending book. New customers are receiving better deals than existing customers.

You may be loyal to your bank, however, as illustrated above banks typically do more to get new business than look after their existing clients.

To assist you with reviewing your current loan facility, please feel free to contact us directly. We will be more than happy to help.

Mick: 0400 011 828
Joel: 0432 227 199

neilforrester

Author neilforrester

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