What should you be doing to get ahead while interest rates are low?

I’m often asked by clients what they should be doing to get ahead, as with most things in life the simpler the strategy the more effective it often it. The strategies I’ll touch on over the next few weeks are just that, but in times of low interest rates they’re easier to implement and can have a powerful impact on your long term position.

It probably doesn’t feel like it anymore, because it’s been this way for some time, but interest rates are really low! Home loan rates in the High 3%’s or very low 4%’s are at around 60% of the long term average. Credit card rates are still criminal at around 20%, but more about that later.

The first strategy is a really simple one: don’t pay more interest than you need to!

Once you have a strategy and have identified the loan structure and products that will best help you achieve your long term goals, make sure you’re not paying over the odds. If your home loan doesn’t sound start with a 3 (or a very low 4 depending on your circumstances), let us help you research a better one!

As the calculations below show, paying 4.25% when you could be paying 3.95% will cost you an extra $ 25 059 over the term of your loan, which equates to almost 2 years of extra repayments you may not need to be making.</>

Loan repayments at 4.25% over 30 years:

With refinance to a lower rate of 3.95% and keeping the same monthly repayments as before, you’ll save $25k and almost 2 years off the loan:

If you want to run these numbers for your mortgage, visit www.affinitasfinance.com.au/calculators.

A word of warning in terms of rate shopping though, it’s important to compare all aspects of the loan, how it fits with your strategy and any hidden costs or post settlement inflexibility (which can be very expensive), rather than just chasing the cheapest rate. Think super cheap airline tickets, except your home loan will be a much longer journey.

Also be careful of lenders looking to “buy business” with very low headline rates, we do often see an increase in a lender’s standard variable rate following one of these campaigns which can leave you back where you started, or worse off.

Managing rate creep

Once you have a competitive home loan, it’s important to keep it competitive. Rate creep is where banks make a fortune off borrowers. You’ll have noticed that when the RBA lifts rates, the banks are very quick to pass on the increases, but when they drop, there can be a substantial time lag before rates drop. Often the banks won’t match the RBA reduction and in recent months we’ve had the return of the out of cycle rate increase where the banks cite international funding pressures as the reason for increasing their standard variable rate when the RBA have made no change. At the same time they will often offer larger discounts to new customers to remain competitive.

Over time this means that your rate in comparison to what a new borrower is offered will gradually creep up. This is why we renegotiate rates for our clients on an annual basis. Where lenders come to the party our client gets the benefit of a greater savings, just this financial year we’ve saved our customers around $63 000 a year in interest by renegotiating their existing loans.

The bank’s won’t always budge and where the bank won’t meet the market, we can look into other lenders offerings to see if you would be better off moving to a new lender to be their new customer.

With the coverage of the Royal Commission and the tightening of lending standards, many people have assumed refinancing to get a better deal is too hard at the moment. Your existing bank is likely counting on this, let’s not buy into it.

We’ve had a lot of success in helping clients into structures that work better for them and achieving some great savings.

What our customers have to say:

Adam, Brisbane

I wish there were more people like Tanya out there. She is such a lovely person, she knows her industry and she can explain finance in terms that anyone can understand. She is very professional, and approachable. I have already recommended Tanya to a work colleague, and they purchased their new home also finding Tanya a breath of fresh air. Thanks again Tanya for your help, and I will always use your services for any other investment opportunities that may arise.

Adam, Brisbane

Rachel, Sunshine Coast

No task was ever too great for you to handle. I found your service was extremely prompt and no query was ever too simple nor difficult for you to take on. Tanya, I felt as though I had trust in you from the very first phone call and you certainly met all of my expectations and more in a professional and friendly manner. Thank you.

Tanya, your interpersonal skills are second to none. Apart from being exceptionally savvy when it comes to your role, I found you incredibly approachable. Your happy disposition just made the whole experience of buying a property a joy. Thank you.

Rachel, Sunshine Coast

Pol, Brisbane

Your solution also took a lot more into consideration than just our home loan. You also answered all our many, many questions simply and quickly. You have an ability to explain intricate financial details in 'plain speak'. Your overall easy going personality and professionalism was refreshing along with honesty and frankness which was also appreciated.

Pol, Brisbane

Trish, Brisbane

It's difficult to narrow down what impressed me most - you provide an excellent service. I think one of the greatest things was that you genuinely cared about the result. You worked so hard and so efficiently to ensure that I was able to move forward in the process of purchasing my first home.

Trish, Brisbane

Shayn, Brisbane

Considering the complexity of the loan we have applied for Tanya has left me with a sense of assurance that our best interests were always first and foremost. Her explanation of how the whole process works was always presented clearly and confidently. She was always prepared to answer any questions we put forward and never hesitated in incorporating her own personal experience in any of her responses. We will continue to keep in touch with Tanya and when next we require loan assistance, Tanya will be number one on our list.

Shayn, Brisbane

Graham, Brisbane

Tanya du Preez has given me the advice that I couldn't get from the banks. Tanya advised us exactly how to achieve our investment goals for the next 5 years. If you are thinking about investing, your first investment should be 30 mins with Tanya. It will cost you nothing and could mean you retire early.

Graham, Brisbane

Sally, Brisbane

All parts of the process were explained simply and clearly so that I could understand what was going on as I have never applied for a loan before so this was all new territory for me. Thanks for all your help Tanya we were so glad to have your help rather than having to deal with a bank directly; much more personal and caring service.

Sally, Brisbane

Jennifer, Brisbane

I really appreciate your flexibility to meet with me at my convenience, advice based on knowledge and experience, referrals to other products and services and general sense of 'relief' that my future financial state is in good hands.

The whole team is both professional and friendly - a great wealth of experience. The service greatly exceeded my expectations and I gladly recommend your services to others.

Jennifer, Brisbane

David, Brisbane

All queries were promptly answered. Great staff correspondence, we were always able to access someone to raise concerns. We were impressed with the attention to details. Tanya really listens and takes notes of the type of people we are and what loan setup would suite us. The services you referred us to have impressed us as well. You are very approachable and never made us feel silly with our questions.

Knowing you & your team are looking after our lending needs gives us a peace of mind and has made the process almost stress free.

David, Brisbane

Brian, Sunshine Coast

Tanya has skilfully and successfully managed the complexities of refinancing our business and property affairs. This crucial and timely financial manoeuvre has involved a detailed assessment and understanding our current business operation and financial needs. In addition, Tanya has worked with us in planning our financial strategies.

Tanya has provided us with a high standard of service and advice that has saved our companies significant amounts of money and continues to expand our knowledge on how to operate in the new and ever changing banking environment so that it best suit our business and property portfolio's needs.

Brian, Sunshine Coast