All four major banks fully passed on the recent 0.25% interest rate cut announced on March 2. The banks were actively encouraged to pass the full rate cut on by the Prime Minister even before the cut was officially announced.
A mortgage holder with a debt of $300,000 would save approximately $40 as the result of the rate cuts.
The decision to cut the rate to a historic low level was in response to the potential impact on the economy of the coronavirus along with continued sluggishness of the economy and the impact of this summer’s bushfires.
The RBA’s move to cut rates has to be seen in the context of having very few rate cut options left. Factors it had to take into consideration were the OECD’s expectation that the Coronaviris could cut 0.5% off Australia’s projected growth rate, lower than expected growth figures for the past quarter and continued low retail sales figures. The decision was not taken lightly and the RBA called on the government to assist in providing stimulus to the economy using fiscal stimulus tools available to it.
Analysts expect that the RBA will have little alternative but to cut rates by a further 0.25% in the coming months as the country slips close to a recession.
The rate cuts now make home ownership a more attractive option financially than it has been for some time. However, the growing uncertainty in the economy may put a dampener on borrowing in some quarters as people look to consolidate their financial positions.
If you are considering entering the home or investment market or wondering if your current finance arrangements are in line with the market, now is the tie to call the team at Australian Finance Hub to discuss your specific needs and requirements – the current interest rates certainly present opportunities for home buyers and investors.