RBA takes emergency action, cuts interest rates to 0.25%

The Reserve Bank made the extraordinary decision to cut interest rates ahead of schedule today, as the coronavirus outbreak threatens to derail economic activity across Australia.

The official cash rate now sits at an historic low of 0.25%.

In a statement issued today, RBA Governor Philip Lowe said the move will help the economy regain its footing amid widespread disruption.

"The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary and fiscal policy, play an important role in reducing the economic and financial disruption resulting from the virus,” he said.

"At some point, the virus will be contained and the Australian economy will recover.”

“In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly."

RELATED: Which banks have cut home loans and where do rates currently sit?

The dramatic move mirrors decisions being made by central banks around the world.

Earlier this week, the US Federal Reserve cut interest rates by a full percentage point and announced it will be recommencing the quantitative easing program it first launched during the GFC.

Closer to home, the Reserve Bank of New Zealand made headlines after slashing its own official cash rate from 1.00% to 0.25%, pledging to keep it at that mark for at least 12 months.

According to Mozo’s Banking Expert Peter Marshall, the RBA faces immense pressure to move in line with its global counterparts.

“The Board understands that any tools they have available need to be applied if they don’t want to see the Australian dollar drop through the floor,” he said.

The RBA typically makes monetary policy decisions on the first Tuesday of every month. This month's inter-meeting decision is a break from tradition we didn’t see even during the GFC.

RBA moves ahead with Quantitative Easing

The Board also detailed plans to introduce a bond purchasing program to protect against further economic fallout, something it had telegraphed in a statement on Monday. 

It will be specifically targeting the yield on three-year Australian Government Securities (AGS), hoping to bring it down from its current perch of around 0.45% to 0.25%.

“We have chosen the three-year horizon as it influences funding rates across much of the Australian economy and is an important rate in financial markets,” Dr Lowe said.

“It is also consistent with the Board's expectation that the cash rate will remain at its current level for some years, but not forever.”

The program will commence tomorrow.

How will banks respond this time?

When the RBA lowered the cash rate by 0.25% earlier this month, 52 lenders in our database announced they would be passing on the full cut to their variable rate customers.

That included all four major banks. After Westpac moved to reduce rates by 0.25% not long after the RBA’s decision, the rest of the Big Four quickly fell in line.

It was a show of enthusiasm we hadn't seen since the first cut of 2019.

Given how the current crisis has developed, there is an expectation that most banks will do right by households and businesses and pass on the full cut again, but whether or not they’ll be able to do so remains unclear.

If they opt to cut, anyone servicing a mortgage could find themselves in a much better position financially — whether they decrease the size of their repayments or continue paying down their loan at the same pace.

We’ll be keeping track of decisions from key lenders as they come in. If you feel refinancing is in order, be sure to visit our home loan comparison page to browse what's currently available

Mozo may receive payment if you click products on our site. We don’t compare the entire market, but you can compare more home loans here.
Last updated 10 December 2024 Important disclosures and comparison rate warning*

Home loan comparisons on Mozo

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    6.23 % p.a.
    Initial monthly repayment
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    5.90 % p.a.
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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

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    5.69 % p.a.
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    Comparison rate
    5.97 % p.a.
    Initial monthly repayment
    $2,899
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    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

  • Basic Home Loan

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    6.16 % p.a.
    Initial monthly repayment
    $3,043
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    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

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    6.06 % p.a.
    Initial monthly repayment
    $3,011
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    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • Budget Home Loan

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    6.04 % p.a.
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    6.07 % p.a.
    Initial monthly repayment
    $3,011
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    Enjoy a discounted variable home loan from IMB. Get up to $4,000 cashback (T&Cs apply). Life-of-loan discount off IMB’s standard variable interest rate. Unrestricted additional repayments. Free Internet and Mobile Banking redraws (T&Cs apply). No monthly fees to pay. Up to a 30 year loan term. Split loan available. No offset account.

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    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Optimum Fixed Rate Home Loan

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    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as redraw. No application, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
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    • LVR<70%
    Interest rate
    5.69 % p.a.
    Fixed 5 years
    Comparison rate
    5.97 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
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    • LVR <70%
    Interest rate
    5.69 % p.a.
    Fixed 4 years
    Comparison rate
    6.23 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Convenient offset account. No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

  • Fixed Home Loan

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    6.28 % p.a.
    Initial monthly repayment
    $2,899
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    Get the security of a competitive fixed rate home loan for 2 years with IMB. Get up to $4,000 cashback (T&Cs apply). Up to 12 months repayments in advance without penalties. Free Internet and Mobile Banking redraws (T&Cs apply). Up to a 30 year loan term. Split loan available. No offset account.

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    $2,931
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    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Variable Home Loan 90

    • Principal and Interest
    • LVR <90%
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • Budget Home Loan

    • LVR <80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.04 % p.a.
    Variable
    Comparison rate
    6.07 % p.a.
    Initial monthly repayment
    $3,011
    Go to site

    Enjoy a discounted variable home loan from IMB. Get up to $4,000 cashback (T&Cs apply). Life-of-loan discount off IMB’s standard variable interest rate. Unrestricted additional repayments. Free Internet and Mobile Banking redraws (T&Cs apply). No monthly fees to pay. Up to a 30 year loan term. Split loan available. No offset account.

  • Neat Home Loan

    • Owner Occupier
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    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

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    6.09 % p.a.
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    6.33 % p.a.
    Initial monthly repayment
    $3,027
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    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Basic Home Loan

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    Interest rate
    6.14 % p.a.
    Variable
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    6.16 % p.a.
    Initial monthly repayment
    $3,043
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    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
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    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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