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Cut back or rate cut - what would you take?

One of our lenders, Sovereign recently rolled out a very special one year rate which begs the question what do clients want?

Cash or a sharp rate?

Cash clearly has benefits as people love getting money in their hands and also it is an instant reward which is given when the loan is drawn down. Many lenders also have other associated offers such as special rates for credit cards and rewards schemes such as Airports for any new lending.

However, a sharper rate is often a much better deal for the customer. A key difference is that it's a benefit that accures over time though savings on lower interest repayments, rather than cash up front.

We did a bit of maths on this to see how it stacks up. We've picked a loan amount of $280,000 as that is around the average loan size reported by lenders.

On an interest-only loan, the fortnightly repayments and annual savings are as follows:

5.99%- $643.31 per fortnight and $16,726.32 annually

5.49% - $589.61 per fortnight and $15,329.88 annually (difference of $1,396.44 in the first year)

5.10% - $547.73 per fortnight and $14,240.98 annual (difference of $2,485.34 in the first year)

So what would you choose?

If you 'd like to discuss what lenders are offering and the deal best suited for your needs, give us a call on 0508 THE MARSHALL (0508 843 627)