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Take advantage of low interest rates now

Whether or not the Reserve Bank of Australia (RBA) cuts rates or not, now is a great time for mortgage borrowers to find big savings on their home loan.

According to comparison website finder.com.au, eight lenders are offering special promotions for a limited time, for both first home buyers as well as existing buyers. Three lenders, including National Australia Bank (ASX:NAB) and its subsidiary UBank as well as RAMS, owned by Westpac Banking Corporation (ASX:WBC) have cash back offers for refinancing, according to finder.com.au spokesperson, Michelle Hutchison.

NAB and RAMS are giving $1,000 to borrowers who switch from another lender and apply this month, while UBank is offering a $500 gift card for switching. UBank is also opening its doors to first home buyers for the first time.

“It’s a great time for borrowers to take advantage of the specials on offer. For instance, if you found a better deal than your current lender, ask them to match it or consider switching. If you’re a first home buyer, work out your serviceability with mortgage calculators and compare what home loans will suit you,” says Ms Hutchison.

But there’s a warning that comes when choosing a promotional deal. If the interest rate on your new home loan is higher than your existing one, you could end up paying thousands more over the life of the loan.

Variable home loans start at just 4.55% from loans.com.au according to finder.com.au and competition is rising. All four major banks passed on the full 0.25% rate cut in August, with Westpac cutting by 0.28%.

Macquarie Group (ASX:MQG) is also boosting its mortgage lending business, distributing through mortgage brokers such as Yellow Brick Road (ASX:YBR) and Mortgage Choice (ASX:MOC), as the investment bank looks to cut into the estimated 83% market share held by the big four.

Foolish takeaway

Mortgage borrowers could save thousands of dollars by shopping around for a cheaper home loan. In some cases you may not even have to move to another lender, if you can get your existing bank to match a lower rate.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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