Significant Number of Homeowners Adjust Repayments Amid Rate Cuts – Money Advice Experts in Services

In the wake of the May rate cut, recent data from the Commonwealth Bank reveals that a significant number of eligible home loan customers opted to reduce their mortgage repayments. Specifically, one in ten customers chose to adjust their direct debit repayments following the interest rate decrease.

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The data highlights a regional trend, with New South Wales emerging as the state where homeowners were most inclined to decrease their repayment amounts as interest rates fell. Among those who decided to lower their repayments, a substantial 39% hailed from NSW, surpassing Victoria where 31% took similar action.

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Furthermore, the analysis indicates that customers aged between 31 and 50 were the most proactive in reducing their repayments, representing the largest segment of those opting for this financial adjustment. Notably, there was a higher incidence of repayment changes among investment loans compared to owner-occupier loans.

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This recent development mirrors a pattern seen after the February rate cut, where around 10% of eligible customers had also modified their repayments, eventually climbing to 14% before the May rate cut by the Reserve Bank of Australia. Despite a larger pool of customers being eligible to make changes post the May rate cut, the proportion of those taking action has remained relatively stable.

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Over the combined rate reductions in February and May, amounting to 0.50% per annum, potential savings of approximately $160 per month could have been realized by individuals making principal and interest repayments on an average loan size of $500,000.

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Discussing the data ahead of the RBA cash rate decision, Tess Sutherland, General Manager from the bank’s Home Buying team, emphasized that only a small percentage of customers were opting to reduce their repayments, with most choosing to maintain higher repayments to expedite loan repayment.

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Sutherland highlighted that the bank had streamlined the process for customers to adjust their repayments through the CommBank app and NetBank, emphasizing that the decision was entirely in the customers’ hands to manage their finances as they saw fit.

She noted that in a state like NSW, where property prices are notably high, it made sense for more customers to ease financial pressure by adjusting their repayments, providing some financial breathing space within their budgets.

The data also unveiled that an overwhelming majority of customers who opted to modify their home loan direct debits did so digitally via the bank’s online platforms within minutes, underscoring the bank’s commitment to providing a seamless digital banking experience.

As customers navigate the evolving landscape of home loan repayments amid fluctuating interest rates, the data sheds light on the financial decisions and behaviors of homeowners in response to changes in the economic environment.

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