A retirement lender has announced its decision to reduce interest rates in line with the Reserve Bank’s cash rate cut.
Household Capital has announced that it will once again lower its interest rate on its Household Loan product following the Reserve Bank’s decision to drop the official cash rate to the new historic low of 1 percent.
The specialist retirement lender had launched the loan in March this year, allowing retirees to access additional retirement funds by using a low interest loan to transfer a portion of the value of their homes into their superannuation fund or investment account. At the time of the launch, the product charged an interest rate of 5.9 percent p.a.
“To honour our commitment to keep rates as low as possible, we passed on the full 0.25 percent rate cut last month; we’ll also pass on this rate cut, in full, to our clients,” Dr Joshua Funder, CEO of Household Capital, said.
“Lowest rates are important to ensure the best interests of clients are fully considered.”
However, Dr Funder noted that low rates are not good for everyone, especially retirees that are dependent on interest earned from savings in term deposits. This is unhelped by the long line of lenders who have cut their rates on savings and term deposit accounts recently.
“With interest rates in Australia at historic lows, many retirees are really feeling the squeeze,” Dr Funder said.
“We can help these people by providing responsible access to their home equity to improve their retirement funding.”
Household Capital’s $100-million wholesale debt facility was provided by ME Bank earlier in the year, with the bank also making a strategic equity investment in the lender.
The specialist lender operates on a fee-for-service model, meaning that it does not pay any commissions to brokers.
“Household Capital receives an establishment fee to cover the costs of putting the loan in place and interest is charged on the capital drawn from a person’s home. The final amount is paid when the person leaves the home and the house is sold,” the lender previously explained.
“Household Capital does not pay commission or trailing commission to brokers and there are no ‘break costs’ or hidden fees. Instead, Household Capital’s financial services are delivered alongside superannuation funds or financial advisers to fit each retiree’s specific needs.”