RBA's May decision: cash rate cut to record low 2.75%

To the jubilation of homeowners across the country, the Reserve Bank of Australia has today decided to cut the official cash rate by 25 basis points to 2.75%, taking the cash rate to a record low.

In a statement, Governor Glenn Stevens said 'further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target'.

Break down the Bankworld jargon for me, please!

Today's decision appears to be first and foremost a reaction to less than optimal inflation figures, with recent data suggesting that both headline and underlying inflation are close to dropping below 2%, and thus out of the Reserve Bank's target zone.

April also saw a drop in house prices and an increase in consumer and investor stress, weighing heavily on the retail and investment sectors.

The Board's decision therefore seems to be an attempt to boost consumer confidence and incentivise growth, both of which will hopefully fend off an inflation blow-out.

What does this mean for borrowers?

Keep a close eye on your bank - in order to see which banks pass on the full 25 basis point cut, check out our Naughty or Nice table.

If your institution ain't playing fair, think about switching and potentially saving big time. 

And for savers?

Expect at call savings account rates to drop, but don't be content with a poor rate. If your bank isn't giving you a good deal, don't be afraid to scout around and find a better option for you and your hard-earned cash.

Consider popping your dough into a high-interest savings account. Top options this month include:

Top home loans - rates updated daily

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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, loan amount and term entered. 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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