The RBA cash rate is only one factor that determines your mortgage rate. This guide explains the other key elements that influence the interest rate you pay, including bank funding costs, market competition, and your personal loan-to-value ratio (LVR). Learn what really affects your mortgage rate and how to ensure you're getting the best deal.
We all watch the news on the first Tuesday of the month to see what the Reserve Bank (RBA) does with the official cash rate. But have you ever noticed that the rate your bank charges you is different, and that it doesn't always move in lockstep with the RBA?
That's because the RBA cash rate is just one piece of a much larger puzzle. Understanding the other factors is the key to knowing if you're getting a truly competitive deal on your Gold Coast mortgage.
1. The Banks' Funding Costs Banks get their money from various sources, including customer deposits and, crucially, international money markets. The costs in these markets can change independently of the RBA, which can affect the interest rates they offer customers.
2. The Level of Competition The mortgage market is incredibly competitive. If a lender wants to grow its market share, it may offer a very sharp, discounted interest rate to attract new customers. This is why new customers often get a better deal than loyal, existing ones.
3. The Loan-to-Value Ratio (LVR) Your LVR is the percentage of the property's value that you are borrowing. A lower LVR (meaning you have a larger deposit or more equity) represents a lower risk to the bank. To reward this, lenders will often offer a lower interest rate to borrowers with an LVR below 80%.
4. Your Borrower Profile Lenders also assess you as a borrower. A strong, stable income and a clean credit history make you a more attractive customer, and you may be able to access better rates.
The Broker's Advantage
Because your final interest rate is influenced by so many factors, the only way to ensure you're getting the best deal is to compare the market. As your mortgage broker, we understand all these variables. We can take your unique financial situation to our panel of over 60 lenders to find the one that will offer the most competitive rate for you.
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