Interest rate savings to reduce mortgages

Published: January 23, 2009 - 08:11 PM

How are you spending your interest rate cut?

The Sydney Morning Herald (SMH) has reported that the majority of mortgage holders are using the recent interest rate drops to reduce their outstanding mortgage debt rather than reducing their home loan repayments and pocketing the cash savings.

Of the 25% of mortgage holders who have taken the drop in interest rates as an opportunity to reduce their repayments, about half of these are using the extra cash to reduce other debt. Only a very small percentage - 3% as reported by the SMH - are spending the additional funds on discretionary items.

Alison Walter of ShopAround.com.au commented that in these uncertain economic times those with home loans should be cautious.

"In times of recession, those households who have the least debt are those that are most likely to survive. With such uncertainty in the market and the economic crisis beginning to hit the job market, homeowners with a mortgage should use the opportunity of cheaper interest rates to reduce their mortgage as much as possible. These low interest rates we are seeing at the moment are a great chance to reduce mortgages and we're pleased people are taking the opportunity to do just that."

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