What a roller coaster it has been
The RBA cut the official cash rate for the third time this year at its October meeting.
Since the first reduction in June, Canstar calculates there have been 593 cuts to variable interest rates and 1,175 cuts to fixed interest rates. So, as a consumer try keeping a track on that!
It’s good news for home borrowers, but with Banks profit margins under pressure from low rates the cuts were not expected to be passed on in their entirety but rather in the range of .13% and .20%.
Most borrowers will still be on rates around 4% compared to lows under 3%. The difference in repayments on an “average” mortgage is over $3,000 a year. Too much to ignore.
If your lender hasn’t passed on the full RBA rate cut to you, you may like to listen to Treasurer Josh Frydenberg and think about voting with your feet. There are plenty of lenders who are passing on the full rate cut to customers and switching loans is getting easier and cheaper all the time.
Banks primarily take this opportunity of decreasing rates to ‘buy new business’. In the past existing borrowers have waited weeks and months for any benefits whereas new borrowers are offered the new rate immediately. Often your existing bank is offering better rates to new customers rather than rewarding those customers they already have.
However, the rate cuts have marked the start of a new trend, with many home loan rates now in the 2% range and possibly go even lower. Some commentators are predicting another cut in November with the argument – The latest data from the labour force supports the case for another reduction to the cash rate.
So, watch this space – borrowers should be reviewing their home loan every time the RBA makes an adjustment to the cash rate which is where we come in. Talk to us. We are here to help and make sense of what is available in the marketplace.
Warm regards,