Latest Interest Rate Cut
The Reserve Bank of Australia has trimmed Australia’s official cash rate to a new record low, dropping it by 0.25% to 1.5% in early August.
This cut is the second the central bank has made in 2016 after it also announced a 0.25% reduction after its meeting in May.
The low inflation reading, along with the continued resilience of the Australian dollar, were the primary reasons behind the latest decision from the RBA. The Central bank’s decision was likely made easier given a recent cooling in house price growth.
The hope is a chance price growth could take off again if the RBA cut is passed on in full by lenders. If lenders do pass the cut on, Neville Sanders, president of the Real Estate Institute of Australia, believes it will have a significant positive for both borrowers and business.
The Finance Brokers Association of Australia’s has also expressed his disappointment in all the big four banks failing to pass on the latest cash rate cut in full.
The Reserve Bank lowered the official rate to 1.5% per cent – their lowest ever.
“Banks must protect shareholders but they also must look after their customers. It was disheartening to find lenders not passing on the full reduction which most banks passed on during the last official rate reduction in May.”
CBA announced it will lower its standard variable rate mortgages by 13 basis points; Westpac dropped its SVR by 14 basis points; NAB will drop its standard variable business rate by 10 basis points, effective from 19 August; and ANZ will lower its SVR by 12 basis points by 12 August.
Most banks have now openly advertised their rate drops. All in the .10 – .15% range. No one passed on the whole rate drop. All have taken at least 2 weeks to pass on the cut with the latest kicking in 23rd August.
On an average mortgage should the lenders have passed on the whole cut it was anticipated that an average mortgage of $500,000 would have saved $75 per month on payment. With the smaller amount pass on by the banks it will only save the average home loan payment $35 per month.
Still rates are at their lowest ever – our opinion is still the same. Make hay while you can and keep you payments as they are so you can make some headway on your mortgage. If you do want to look at fixed – only for the shorter term 1-2 years. Rates look like they may stay low for some time. When that fixed term is up – take another look and perhaps fix for the longer term as they will rise!
Donna-Lee Parkes