February RBA announcement 2015

Dear Client,

Great news! Or is it?
While economic data continues to show weakness and after months of speculation on whether the cash rate (and subsequently interest rates) will drop, the Reserve Bank announced today it has actually decided to drop the
cash rate to 2.25% - the lowest in Australian recorded history.

Prior to 1990 the Reserve Bank of Australia did not publish an official cash rate setting and cash rates going back to 1960 were a proxy of the current measure. Historical data shows the lowest cash rate proxy was 2.89% in January 19601.
Please be aware however, although the Reserve Bank has dropped the cash rate, THIS DOES NOT MEAN that your financial institution will automatically pass the savings on to you, nor are they likely to do so immediately. Keep posted to the media this week.

While waiting for your lender’s decision, when was the last time you checked that your offset account has been set up and calculated correctly?
Our article of interest this month is a story from one of our industry colleagues helping one of their clients retrieve $81,000 of overcharged interest.

It’s a great read.

If you are not sure how to check your offset calculations, give us a call. We’d be happy to look into it for you.
As always, we look forward to helping you with your finance needs.

With your best interest in mind…


Quantum Investor
1: CommSec

It is not uncommon in the world of finance to find out many years later that the home loan that was set up for you wasn’t actually followed through as intended with the lending institution.

We have all heard of lenders overcharging interest every now and then, some accumulating to a few thousand dollars. But how could a lender overcharge $81,000 without your even noticing it?

Here’s how…

A client took out a mortgage in 2007 with a lender (not to be named).

The original loan was split into a large component of fixed and a small variable portion where an offset account was linked. The reason for the smaller variable loan was that the client wished to pay down the variable portion prior to the expiry of the fixed portion and then have the offset account against the larger portion once that fixed period had expired. This is a common finance structure for people refinancing other debt outside their home loan and wishing to pay down this debt prior to the home loan.

Just for security and peace of mind, the client attended her local branch. She enquired if her loan(s) were set up this way, that it would not affect her offset account and that the money held there would indeed be considered against the mortgage(s). She was informed that it would not be affected.

When the client met with her broker last month to explore the opportunity of a better interest rate, the broker noticed that the interest being charged against her mortgage appeared to be excessive based on what was stated as ‘sitting in the offset account’.

Our colleague then challenged the bank and was informed that the account she thought was an offset account was not linked to the loan and had not been offsetting the interest at all throughout the entirety of the loan. After many emails, calls and evidence of the request for the offset account, they finally reached an outcome with the bank that resulted in the client being refunded an amount of over $81,000 (overcharged interest during the period of the loan).

If it wasn’t for the eagle eyed broker she would not have been any the wiser.

So if you have an offset account (or you think you had one set up at the time of your loan), we encourage you to do a double check on your statement that the interest being charged on your mortgage is on the balance of the loan minus the amount of money sitting in your offset account each month. A 10 minute exercise could find you thousands of dollars as it did for this client!

If you’re not sure how to do this then please contact the office, or send your statements through to us so we can double check this for you.

At the same time, we will take the opportunity to ensure your interest rate is still competitive.


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