Don't Pay Lazy Tax

Well, here’s another one you probably didn’t want to hear.

The Reserve Bank of Australia (RBA) has increased the official cash rate by another 0.25 percentage points, taking it to 4.85%. That’s the fifth rate rise this year, and there’s little doubt Australian households are feeling the squeeze.

So, what’s behind the latest increase? In simple terms, inflation isn’t playing ball.

The latest figures from the Australian Bureau of Statistics show annual inflation climbing from 4.0% in August to 4.3% in September. Even underlying inflation, which strips out some of the more volatile price movements, has edged up from 3.5% to 3.6%.

The RBA wants inflation sitting comfortably between 2% and 3%. Unfortunately, we’re still some way off that target.

And the Reserve Bank isn’t taking any chances.

It’s keeping a close eye on several things that could push prices even higher, including rising oil prices linked to tensions in the Middle East, increasing costs associated with the global AI boom, and Australia’s limited capacity to keep up with growing demand.

In other words, the RBA is worried that inflation could stick around longer than we’d like. And it’s prepared to keep pulling the interest rate lever if necessary.

What Does This Mean for Your Mortgage?

If you’ve got a home loan, another rate rise is likely to mean higher repayments and a little less breathing room in the household budget.

But here’s something worth remembering you don’t have to simply accept whatever interest rate your bank decides to charge you.

Banks are competing for your business, and there may be a better deal sitting just around the corner. A quick rate review, a phone call to your lender or even refinancing could potentially save you thousands of dollars over the life of your mortgage.

Don’t Pay Lazy Tax!

Here’s something I’ve noticed over the years: plenty of people are happy to spend hours hunting around for a bargain on groceries, shopping for a new TV or saving $150 on their car insurance, but when it comes to their biggest household expense – their mortgage – they do absolutely nothing.

They simply let their home loan roll along year after year, quietly paying whatever interest rate the bank decides to charge them.

That’s what I call "lazy tax".

Banks know that many customers won’t bother reviewing their loans. They’ll often offer attractive rates to new customers while loyal, long-standing borrowers are left paying more than they need to.

And here’s the thing: a small difference in your interest rate can add up to thousands of dollars over the life of your mortgage.

So, don’t be that person.

Make it a habit to review your home loan at least once a year. Check what rate you’re paying, compare it with what’s available in the market and ask your lender to sharpen their pencil.

If they won’t budge, consider refinancing.How Do You Find a Better Mortgage Rate?

The good news is that checking whether you’re paying too much doesn’t have to be difficult. You don’t need to spend days ringing around every bank in Australia.

Here are three simple steps:

1. Find out what interest rate you’re currently paying.

Jump onto your internet banking or latest home loan statement. Write down your current interest rate, outstanding loan balance and remaining loan term.

2. Compare your rate with what’s available.

There are several free Australian comparison websites that make this relatively easy.

Simply enter some basic details about your loan and property, and you can compare interest rates, repayments and loan features.

Remember to compare the comparison rate as well as the advertised interest rate, because fees and charges can make a difference.

3. Pick up the phone and negotiate!

Here’s a little trick: you don’t necessarily need to change banks to get a better deal.

Once you’ve found a more competitive rate, call your existing lender and tell them you’ve been shopping around. Explain that you’ve found a better deal elsewhere and ask them what they can do to keep your business.

You might be surprised at how quickly they become interested in negotiating! If they won’t offer you something competitive, consider refinancing with another lender. Just make sure you factor in any establishment fees, discharge fees and other switching costs before making the move..

My Advice?

Don’t sit back and let the bank take more than it needs to. Your mortgage is probably one of your biggest household expenses. Give it the attention it deserves. Set aside an hour once a year to review your loan. It could be one of the most profitable hours you spend all year. Remember, your bank isn’t going to volunteer to save you money. Sometimes you need to ask! And whatever you do, don’t pay the lazy tax.