What the Latest Interest Rate Cut Means for You
Finally! Some Relief: What the Latest Interest Rate Cut Means for You
The Reserve Bank of Australia (RBA) has just announced a 0.25% reduction in the official cash rate, bringing it down to 4.10%. This move comes as inflation eases into the RBA’s target range of 2-3%, offering potential relief for borrowers and a boost to economic growth.
But what does this mean for homeowners and those looking to buy?
Let’s break it down…
How This Rate Cut Affects Homeowners
If you have a variable interest rate home loan, your lender may pass on some or all of the rate cut. This means your monthly repayments could decrease, leaving you with more financial breathing room.
For example, if you have a $600,000 mortgage, this 0.25% reduction could save you around $92 per month. Over a year, that’s an extra $1,104 in your pocket. While these savings may not seem huge on a monthly basis, they add up over time and can be redirected towards paying off your loan faster or managing other expenses.
Increased Borrowing Power for Buyers
For those considering purchasing a home, lower interest rates generally translate to greater borrowing capacity. A couple earning $120,000 each could see their borrowing power increase by up to $25,000 – 40,000.
With the possibility of further rate cuts in the near future, this figure could rise even more, giving buyers additional opportunities to secure the home they want.
When Will Banks Pass on the Rate Cut?
One key question is how quickly lenders will adjust their rates. Some banks act swiftly, while others take weeks to implement changes. We have confirmed all four major banks will pass the full rate cut on within the month.
If you have a home loan, it’s worth keeping an eye on how your lender responds to ensure you’re benefiting from the lower rate.
If you’re unsure how your bank is handling the reduction, now is a good time to review your mortgage and explore whether refinancing could help you secure a better deal.
What About Fixed-Rate Loans?
If you’re currently on a fixed-rate mortgage, this rate cut won’t affect your repayments immediately. However, it’s still wise to plan ahead for when your fixed term ends. Understanding your options now can put you in the best position to take advantage of any future rate cuts.
Time to Review Your Loan?
Whether you’re a first-home buyer, investor, or looking to refinance, this is an important time to assess your loan and ensure you’re in the strongest financial position. Lower rates can provide significant savings, and making informed decisions now can help you maximize these benefits in the long run.
If you are unsure of where to start, our multi-award-winning mortgage specialist partner Mortgage Advice Bureau can help you navigate the changing market and secure the best deal.
Click here to book your no-obligation Lending Planning Meeting today!