RBA Announcement – Cash Rate at an all-time low

RBA Announcement – Cash Rate at an all-time low

In what was a widely expected move, the RBA moved to cut the cah rate to a historically low level of 0.1% This is great news from home borrowers, with banks likely to pass on some if not all of the cut to borrowers, particularly in the area of fixed rate loans.

Providing further certainty for borrowers in the short to medium term, RBA governor Dr Phillip Lowe stated that it was highly unlikely for the RBA to move interest rates in an upward direction for the next three years. Importantly, the RBA has backed this rhetoric up with some measures aimed to keep borrowing costs, these include cutting its three year bond rate target and reducing the exchange settlement rate to zero, hopefully encouraging banks to lend rather to hold money in RBA accounts.

The key point for borrowers is that the cut in rates is likely to lead to the average mortgage cost on a $400000 loan for residential borrowers will be cut by around $33 per month if the bank passes on the full cut. If the last round of rate cuts are any indication, the cuts are most likely to be passed on to fixed rate loans. Prior to the rate cut the average variable home loan rate was 3.34%, with many fixed rate loans being lower than that.

The news is not so good for depositors with deposit interest rates set to fall to even lower levels than the average of 0.55%.

If you would like to discuss the implications of this round of interest rate cuts for your personal situation please give the team at Australian Finance Hub a call today.