4 things you need to know as interest rates (finally) start falling

It’s been a wild ride over the last few years.

House prices rocketed and interest rates fell during the Covid lockdown era. Then inflation took off, so the Reserve Bank told us to stand by for higher rates. And a lot of our clients started to feel the pinch.

Now we’re beginning to turn the corner. The last Official Cash Rate (OCR) announcement by the Reserve Bank on 14 August 2024 stated that conditions were right to reduce the benchmark interest rate to 5.25%.

That’s good news for anyone who has a mortgage – and especially those who have loans set to roll over this year and in early 2025.

So how can you make the most of a falling interest rate environment?

Here’s what you need to know.

1. Understand the timetable.

The Reserve Bank regularly reports on its thinking and announces any OCR movements on fixed dates. The most recent announcement was on 14 August 2024 and the next two are set for 9 October and 27 November 2024. Then it’s the holiday season until 19 February 2025. (You can find out more here.)

What drives their decisions? The OCR committee is mandated to keep inflation in the rage of 1-3%. House prices are big factor in this, which is why homeowners with mortgages need to keep an eye on what the Reserve Bank is saying.

For the team at Sue Tierney Mortgages, these OCR announcement dates are very important. Based on what we learn, we can spring into action and potentially save clients a lot of money.

For instance, we weren’t expecting the OCR to drop in August – but it did. So that has influenced the advice we’ve been able to give. The clients we’ve worked with this month have received the benefit of this well-timed advice.

This leads to our next, very important piece of advice: Don’t jump the gun.

2. Watch out for banks that suggest you re-fix before the OCR is announced.

Some – not all – mortgage lenders like to send out emails with links to ‘Grab this great rate’ as your current fix gets close to the expiry date.

Just clicking on that link could cost you thousands of dollars over the life of the loan. This is because the email may arrive close to the date of the next OCR announcement. You might benefit from holding off.

If it really is a great rate, we will tell you. Or we may suggest that it’s smarter to wait and see.

Remember, our advice is personalised, and it costs you nothing.

3. Get your ducks in a row and be ready to go.

The name of the game right now is, ‘ride the interest rate wave down.’

Like surfing, it’s all about watching the conditions and catching the trend at the right moment.

Bear in mind that it’s not as simple as picking up the phone and saying, “get me a lower rate now.” You need to be prepared.

Every loan is unique and every borrower is at a different stage of life. Some may need more certainty because their household income has dropped and they’re on a tight budget. Others may be in a better position to wait and see.

We need to know what’s happening in your life and whether your goals have changed. That’s the heart of what we do as Financial Advisers. This can take a little time, so it’s really important to gather all your information and schedule a proper talk with you.

Once we have the ducks in a row, we can move fast to find the best rate for you.

4. Don't ignore those emails and phone messages from Tracey.

Since Tracey Little joined our team this year, she’s been in charge of contacting clients who have fixed-term loans coming to an end.

Tracey is our right-hand woman who does the vital job of setting up client appointments as well as getting quotes from lenders and taking care of the all-important paperwork behind the scenes.

It’s her job to gather information from you as well as arrange a time when you’re free to talk with an Adviser. She will send you a questionnaire, which we need completed before we can start researching your loan options.

Tracey isn’t a Financial Adviser, so she won’t be giving you tips on interest rates or mortgage strategies. That’s my job – but I couldn’t do it without her.

If you hear from Tracey it’s probably because you have an important loan or insurance review coming up. It’s not a sales job and it’s not about providing financial advice. She is simply setting things up so our Advisers can be 100% focused on giving you the right advice.

As we said earlier, it’s all about getting all the relevant information so you can get the best deal in the market. Tracey makes that possible.

And remember, you can always get in touch with me directly if you have any questions about your mortgage or Louise if it's your insurance cover. It’s always great when clients are proactive.

Just click on the buttons below.

Tracey Little, our indispensable administrator and support person. She’ll be in touch when it’s time to review your loan.

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