Thursday, November 5th, 2020
The news that The Reserve Bank of Australia has cut the official interest rate by 0.15 percentage points reflects the first change since the previous historic low of 0.25 per cent was announced in March.
With the cash rate now sitting at just 0.10 per cent, many leading Australian economists have called the cut a valuable back-up for budget measures that have been put in place by the Federal Government to help an economy that has been faltering since the impact of COVID-19 struck.
As we approach the lead-up to Christmas, it’s a boost that the Australian economy needs to counter the obvious stagnation caused by the pandemic’s effects. By making this strategic move, the Australian dollar will be kept low, add much-needed stimulation to the export market and, hopefully, result in more movement.
Whether or not banks and lenders will pass on much of the latest rate cut to their consumers is yet to be seen (although there continues to be some movement within fixed rates) but with increasing pressure on financial institutions to focus on fairness, it seems likely that banking customers will see some savings.
Although experts predict that the full rate cut will not be passed on, it is clearly in the banks’ interests to encourage consumer spending again.
For the average home loan client, cutting 15 basis points could mean an annual saving of around $500 in interest and for home-owners who don’t see their own lender pass on the savings, the time could be right to shop around for a better mortgage deal.
By choosing a lender that does pass on the full 0.15 interest rate cut, home loan customers could enjoy significant savings over the life of a 30-year mortgage – something that could add up to $14,857 in interest savings, based on the average mortgage of $479,801 dropping to a variable rate of just 3.84 per cent.
But without legislation to make all banks and lenders pass the full saving on, though, it’s a smart time to talk to a trusted mortgage broking professional to weigh up your options.
The cut is sure to prove popular with consumers and will be especially positive for those who are now finding their mortgage’s compound interest hard to deal with, following the termination of the six-month mortgage freeze period.
Buyer demand is strong, according to local real estate agents, and with owner-occupiers and first-home buyers at the head of the pack keen to borrow and buy because of government stimulus incentives and low interest rates, the property market is sure to keep evolving.
With some property specialists predicting that the combination of increased buyer demand and rate cut-induced property price hikes will lead to homes becoming less affordable, it is up to potential buyers to decide whether now may be their best time to buy.
For any advice about shopping around for a competitive interest rate, or which lender you should choose for your mortgage, talk to our mortgage broking professionals at Loan Actually today.