Photo by José Martín Ramírez C on Unsplash
The Reserve Bank has decided to cut the official cash rate by 25 basis points to 0.50% in its board meeting today.
Today's cut is the first since October, following holds in November, December and February.
The RBA had been expected to hold the cash rate steady again today until recently, when fears over coronavirus and the resulting economic fallout priced a March rate cut as a near certainty.
A recent OECD report, for example, said the virus could slash half a percentage point (about $10 billion) from Australia's annual economic output.
Market pricing for a 25 basis point cut from the RBA increased from 18% at close of business on Friday 28 February to 100% as at yesterday morning.
The market is now expecting the #RBA to use the remainder of its conventional policy immediately - it may well do so, in particular if nothing is forthcoming from other policy makers in a timely manner... #ausbiz pic.twitter.com/M0zhJlbxXa
— Alex Joiner (@IFM_Economist) March 1, 2020
Prior to this, the next rate cut was expected to occur in April at the earliest.
Thinking about refinancing to a low-rate, variable owner-occupier home loan? Below are a handful of low-rate loans in the market.
Lender | |||||||||||||
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Variable | More details | ||||||||||||
FEATUREDUNLIMITED REDRAWSSPECIAL OFFER | Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Variable | More details | ||||||||||||
FEATURED100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Variable | More details | ||||||||||||
FEATUREDZERO APPLICATION FEESFEE FREE OFFSET | Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)
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Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)
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Variable | More details | ||||||||||||
AN EASY DIGITAL APPLICATION | Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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Variable | More details | ||||||||||||
NO APPLICATION FEES | Yard Home Loan (Principal and Interest) (LVR < 80%)
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Yard Home Loan (Principal and Interest) (LVR < 80%)
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Variable | More details | ||||||||||||
NO UPFRONT OR ONGOING FEES | Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)
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Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)
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Variable | More details | ||||||||||||
NO UPFRONT OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)
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Variable | More details | ||||||||||||
UNLIMITED EXTRA REPAYMENTS | |||||||||||||
Basic Home Loan (Principal and Interest) (LVR < 60%) | |||||||||||||
Variable | More details | ||||||||||||
EASY DIGITAL APPLICATION | |||||||||||||
Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%) | |||||||||||||
Variable | More details | ||||||||||||
$0 APPLICATION FEE | |||||||||||||
Budget Home Loan (Principal and Interest) (LVR < 80%) | |||||||||||||
Variable | More details | ||||||||||||
100% FULL OFFSET ACCOUNT | |||||||||||||
Offset Package Home Loan (Principal and Interest) (LVR < 60%) | |||||||||||||
Variable | More details | ||||||||||||
FEATUREDLIMITED TIME OFFER | Smart Booster Home Loan Discounted Variable - 1yr
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Smart Booster Home Loan Discounted Variable - 1yr
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- Fast turnaround times, can meet 30-day settlement
- For purchase and refinance, min 20% deposit
- No ongoing or monthly fees, add offset for 0.10%
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 25, 2022. View disclaimer.
RBA Governor Philip Lowe's statement was chock-full of coronavirus references justifying the cut.
"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," Dr Lowe said.
"It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path.
"The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors. The uncertainty that it is creating is also likely to affect domestic spending.
"As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected."
Mr Lowe also said the board was prepared to ease monetary policy further, further fueling speculation of another rate cut soon.
"The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target," he said.
"The Board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity.
"It will continue to monitor developments closely and to assess the implications of the coronavirus for the economy."
The RBA has previously hinted it would consider implementing Quantitative Easing (QE) should the cash rate reach 0.25%.
The next rate cut, should it be 25 basis points again, would take our cash rate to this level.
Lenders unlikely to pass on full rate cuts
CoreLogic head of research Tim Lawless said there is less certainty this latest rate cut will add fuel to the housing market in the current economic climate.
“This is partly because the latest rate cut is unlikely to be fully passed on to mortgage rates,” Mr Lawless said.
“Furthermore, a low cash rate coupled with concerns around the global spread of coronavirus, has the potential to spook consumers and drag confidence lower.
“Buying or selling a home is a high commitment decision; if consumer confidence slips further from already low levels, we could see Australian households sit on their hands rather than decide to buy or sell, which would weigh on market activity.”
Mortgage Choice CEO Susan Mitchell also said it was unlikely borrowers would see full rate cuts.
Having said that, it has just been announced that one of Australia's major banks Westpac will pass on the full rate cut for home loan customers, something they hadn't done following previous rate cuts.
"However a record low cash rate means a sustained period of low interest rates will continue to stimulate the housing market, worsening housing affordability in the nation’s largest markets, Sydney and Melbourne," Ms Mitchell said.
“The current low rate environment makes now an ideal time for those looking to enter the property market to put their plans in action."
Prushka Fast Debt Recovery CEO Roger Mendelson meanwhile said this rate cut will not stimulate consumer spending as intended, and will only fuel the rise in house prices already seen in major cities.
“Homeowners should take advantage of this opportunity to pay off their debts at a higher rate, by maintaining their monthly payments,” he said.
Disclaimers
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.
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