06 Jun 2019

Most economists predicted that we would see a decrease in the RBA cash rate this week, and indeed that’s what we saw with the new rate now being 1.25%. Its been almost two years since the Reserve Bank moved on their rate so you’re forgiven if are not sure what the real impact will be on your home loan.

In short, assuming you have a variable rate loan, you should be able to expect a decrease in your interest rate and ultimately your loan repayment. The below graph demonstrates the saving you can potentially expect to enjoy based on some examples.

Loan amount examples Likely decrease in repayments
$150,000 $31.25 per month
$250,000 $52.08 per month
$350,000 $72.91 per month
$450,000 $93.75 per month
$550,000 $114.58 per month
$650,000 $135.41 per month


What can I do if my bank has not passed on the full cut?

Some lenders have already announced decreases in the standard variable rates off the back of the RBA decrease however not all have passed on the full 0.25%. As we discussed in our previous blog on the RBA cash rate, what the RBA does with its cash rate does not determine the bank’s own lending rates however it is expected to create a ripple effect. Banks are not obliged to pass on the full cut though it’s often in their best interests as a public relations exercise to do.

If your lender has not passed on the full rate cut where others in the market have, it may be a perfect opportunity to look at your alternate lending options. Many banks are not only advertising historically low rates but are also offering incentives to win new business. If refinancing outside your lender is not an option an internal refinance via a product swap may be the next viable strategy.

Analysts are predicting that we will see at least on more cut before the end of the year to aid in stimulating economic growth, but these cuts may take months to impact the economy at any level. However, it does mean that there is the possibility of additional interest savings in the future.

We urge all mortgage holders to take the opportunity to review their home loans in the wake of the RBA rate drop particularly as the end of the financial year is looming. Our team at Blackburne Mortgage Broking are always on hand to assist with any questions and help save money on your home loan whenever we can.

For more information about how the RBA cash rate works, check out the below blog.

https://mortgagebroking.blackburne.com.au/blog/what-is-the-rba-cash-rate-anyway/

 

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