Save $80 a month on cheaper mortgages

Published: October 03, 2008 - 03:38 PM

$4 billion rescue plan to help make home loans cheaper

By Lesley Coombes

Homebuyers could save up to $80 a month on mortgages after the Federal Government injected $4 billion into the non-bank lending sector, The Age reported Sunday.

The bid to improve competition in the Australian lending market has come after the Australian economy has been hit by the crippling credit crunch in the U.S, a Treasury analysis revealed.

Non-bank lenders now have less than a 10% share in the home mortgage market, compared to a 20% share in July of last year.

Treasurer Wayne Swan urges homebuyers to “vote with their feet” by switching to cheaper home loans.

“We need to have a competitive mortgage market so that people out there who are under financial pressure can get a fair go," Mr Swan said.

Mr Swan assured the $4 billion taxpayer money would be “invested into AAA-rated residential mortgage-backed securities,” he said.

Conflict is raging in Washington after the $700 billion bailout was rejected by Congress last Monday. Consequently, after a revision, it has been passed by the Senate and is now waiting on confirmation by Congress.

The $4 billion Australian rescue package to be injected to the mortgage market is timely but its benefits could take months to be felt by household budgets.

The treasury analysis also showed that if the housing loan market stabilized and returned to normal, homebuyers could save up to $80 a month on average mortgages due to interest rates dropping by half a percentage point.

Wizard Home Loans founder Mark Bouris says “You won’t see a saving overnight but the long-term saving of this is it will maintain the non-bank sector competing with the bank sector which means prices won’t get out of control.”

Until the benefits of the $4 billion plan flow through to households, Australians can still save money by shopping around for the cheapest interest rates and cheap home loans and cheap mortgages.

In these uncertain times it is important for households to reassess household expenses and look for cheaper home loan prices. In addition other living costs can be targeted for savings. ShopAround.com.au helps households to compare gas companies and electricity providers and their prices in order to find cheap electricity and cheap gas rates.

David Power of ShopAround.com.au says “This $4 billion government initiative has come at an opportune time but households will need to be patient before we start to see some changes. In the meantime, ShopAround.com.au offers a valuable gas and electricity price comparison service for households looking to save some money on cheap gas and cheap electricity. We’re helping where we can.”

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