No rate rise; Choice says change banks

Since today is the first Tuesday of the month, the Reserve Bank met again and made a decision on whether or not to raise interest rates. And the verdict is good for us mortgage holders – the official cash rate has remained on hold which means it is unlikely that any banks will increase their interest rates. And since there is no meeting held in January, that means we know where we stand with home loan repayments until at least February 2011.

The Reserve Bank board statement made it clear that taking into account all the various changes in the Australian and global economy in the past month, there is no need to raise the rate at this stage – and in particular, it made mention of the bank rate rises subsequent to their decision last month, since some of the banks raised the rate more than the 25 points the Reserve Bank did. As a result the rates for mortgage holders are now at a level the Reserve Bank considers to be a little above average, so there was obviously a clear decision not to increase them.

At the same time, news from consumer magazine Choice is suggesting that many Australians should consider changing their home loan provider. The big four banks are lucky enough to have a pretty immovable near-monopoly on the home loan market, added to by the fact that 80 per cent of Australians have not even considered changing their bank during the last two years. Choice’s Better Banking campaign said that this apathy is what the big banks rely on:

They rely on lots of Australian consumers staying where they are and that’s when you get hit by high fees, poor interest rates and unfair terms.

Choice says that on average an Australian mortgage holder could save $2,500 a year by shopping around and changing to a non-big four bank. Food for thought!