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Interest Rates Are Dropping. Here’s How to Maximise Your Savings.

Scenario 1: Your fixed rate is ending and new rates are lower.

You’re coming off a higher rate and now have a choice to make. Do you reduce your repayments, or do you maintain them?

Option A: Reduce Your Repayments. The most obvious choice is to drop your mortgage payments to the new, lower minimum. This immediately frees up cash, providing valuable relief for managing other household expenses and rising living costs. It’s a perfectly valid strategy for improving your short-term financial position.

Option B: Keep Your Repayments the Same. This is the secret weapon for getting ahead. By maintaining your repayments at the previous, higher level, every extra dollar goes directly towards paying down your loan principal. The long-term impact of this is huge:

You can also consider a "hybrid" approach by splitting your loan, allowing you to pay down a portion faster while still getting some cash flow relief.

Scenario 2: You're already fixed at a higher rate.

It can be frustrating to be locked into a rate of, say, 7% when new rates are dropping below 5%. The big question is: should you break your current fixed term to take advantage of the lower rates?

The answer depends on one important factor: The Break Fee.

A break fee is a charge the bank imposes to compensate for their loss if you end your fixed term early. The key question we need to answer is:

Will the total interest you save by switching to the new, lower rate be more than the cost of the break fee?

This requires a detailed cost-benefit analysis. We can calculate the approximate break fee with your bank and compare it against the potential savings from a new rate. We can also explore refinancing to another lender, as a new bank's cashback offer could potentially offset the break fee, making the switch even more beneficial.

Your Personalised Strategy is Key

There is no "one-size-fits-all" answer. The best decision depends entirely on your financial goals, your cash flow needs, and the numbers specific to your loan.

This is where professional advice is invaluable. We can help you:

Before you make a move, let's run the numbers together. A short, no-obligation chat can ensure you make the most of this falling-rate environment and set yourself up for long-term financial success.