RBA cuts interest rates to 0.50% in March, so how will your bank respond?
Tuesday 03 March 2020
Official interest rates in Australia now sit at a historic low of 0.50% following the Reserve Bank’s decision to cut 25 basis points at its October meeting in Sydney this afternoon.
"The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected," said RBA Governor, Philip Lowe, in his post-meeting statement.
Only a few weeks ago, financial markets were doubtful that the RBA would pull the lever, but since the reality of the virus outbreak set in - and share markets around the world recorded their steepest declines since the global financial crisis - they’ve been singing a different tune.
“I think that if the share market hadn’t continued sliding and if there had been a bit of a line drawn under it, we would have seen the board hold off until April. But there seems to be an unstoppable direction shift, and the RBA can no longer ignore it,” said Mozo’s banking expert, Peter Marshall.
Will lenders respond with home loan rate cuts?
Now that the RBA has cut the cash rate, all eyes will be on banks and lenders to see how they’ll respond.
“There’s a lot of competition in the home loan space so they’ve got to price their rates as sharply as they can, but on the other hand we’re already in the zone where it becomes difficult for a bank to maintain its profitability,” said Marshall.
When the RBA last cut the cash rate in October 2019, lenders passed on an average of 0.15%. Only a handful - Athena, Homestar, UBank and Freedomlend - passed on the full cut, with the first three the only lenders to do so on all three occasions last year.
Whatever the case this time round, the average mortgage holder stands to see a meaningful reduction in their home loan repayments. We’ll be keeping track of all the latest rate changes as they come in, so make sure you check in periodically for news of your lender’s decision.
March rate cut decisions
With interest rates set to drop left and right, mortgage holders would do well to shop around to make sure they’re getting the best rate. If you’re unsure where to start, be sure to visit Mozo’s dedicated home loan comparison tables for an overview of what's available.
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