RBA holds cash rate at 0.25% for August

author-avatar By on August 04, 2020
RBA holds cash rate at 0.25% for August

Photo by Peter Zhou on Unsplash

Australia's central bank has held the cash rate at 0.25% for the fifth consecutive month.

The decision from the Reserve Bank (RBA) is unsurprising, as most economists agreed the rate would remain unchanged. 

The RBA had previously indicated the cash rate had reached its floor and had no appetite for negative interest rates, and there would be no increase to the rate until inflation was between 2-3% and progress towards full employment had been reached. 

Prior to the announcement, there had been some speculation the RBA may cut the rate to 0.10% based on comments from Governor Phillip Lowe, but it remains at 0.25% for at least one more month. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • 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%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • 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%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 18, 2021. View disclaimer.

Dr Lowe said although the economy was experiencing its worst contraction in 90 years, there was reason for optimism, but expressed concerns about the crisis in Melbourne. 

"As difficult as this is, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia," Dr Lowe said.

"This recovery is, however, likely to be both uneven and bumpy, with the coronavirus outbreak in Victoria having a major effect on the Victorian economy."

Dr Lowe said a baseline scenario would see the unemployment rate peak at 10% as restrictions in Victoria meant the shutdown of non-essential businesses.

"In this scenario, the unemployment rate rises to around 10% later in 2020 due to further job losses in Victoria and more people elsewhere in Australia looking for jobs," he said. 

"Over the following couple of years, the unemployment rate is expected to decline gradually to around 7%."

The RBA Governor said the speed of any sort of economic recovery rested solely on flattening the curve. 

"A stronger recovery is possible if progress is made in containing the virus in the near future," he said.

"This progress would support an improvement in confidence and a less cautious approach by households and businesses to their spending.

"On the other hand, if Australia and other countries were to experience further widespread lockdowns, the recovery in both output and the labour market would be delayed."

Record-low cash rate supporting borrowers 

CoreLogic Head of Research Eliza Owen said the record-low cash rate and RBA's bond purchasing was helping borrowers to lower costs through refinancing.

"ABS (Australian Bureau of Statistics) data suggests the total value of externally refinanced loans increased 25.1% in May," Ms Owen said.

"Since March, almost $40 billion in home loans has been externally refinanced.

"Additionally, the average variable lending rate for new owner-occupier mortgages fell to just 2.93% over May, which is down 33 basis points since the start of the year."

Mortgage Choice Chief Executive Officer Susan Mitchell said the RBA was helping to support the housing market from the fallout from the pandemic. 

"The historic low cash rate continues to support a low cost of borrowing for Australians, which combined with Government incentives appears to be cushioning the pandemic’s impact on the nation’s housing market for now,” Ms Mitchell said.

But with house prices falling for three consecutive months, Ms Mitchell said it was likely this trend would continue. 

“The latest CoreLogic Hedonic Home Value Index revealed that Australian dwelling values fell 0.6% in July, led by Melbourne and Sydney, which recorded declines of 1.2% and 0.9% respectively," she said. 

"As the virus continues to put a strain on household budgets and consumer sentiment we are likely to see further deterioration in the months ahead.”


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

Latest Articles

author-avatar
Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

Collections:

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree to the Savings Privacy Policy