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Early Christmas present for mortgage holders
Released 6 December 2011

The Reserve Bank of Australia has cut interest rates 25 basis points for the second month in a row with the cash rate now at 4.25 per cent.     

RateCity CEO Damian Smith said the cut will bring some extra income and options to around 2.5 million Australians with variable rate home loans this Christmas period.

"The Reserve Bank board has given Australians a good reason to celebrate this month, potentially shaving another $50 off monthly repayments on the average home loan.

"But borrowers shouldn't use two consecutive rate reductions (in November and December) as an excuse to sit tight and not shop around – accepting a 25 basis point discount and sticking with their current lenders when there may be much better deals available.

He said many borrowers may not realise that they could shave more than 1.22% off their mortgage by switching from the benchmark standard variable to one of the cheapest variable rate loans on the market – far more than the effect of any 0.25 per cent reduction from the Reserve Bank.

"By switching to a low-rate loan, borrowers with a $300,000 mortgage could save $233 per month in repayments. And if they ploughed all that saving into repayments, they could save themselves about $77,700 of interest over 25 years and be debt-free more than 5 years sooner," he said.

The RBA next meets in February.