RBA holds cash rate at 0.25% for September

author-avatar By on September 01, 2020
RBA holds cash rate at 0.25% for September

Photo by Urlaubstracker on Unsplash

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

The announcement comes as little shock with economists universally agreeing the rate would remain unchanged. 

The Reserve Bank (RBA) had previously indicated the rate would remain unchanged until progress was made towards full employment and inflation sat between its desired band of 2-3%. 

Unemployment currently sits at 7.5%, but is expected to exceed 10%, and Australia is currently experiencing deflation, with the consumer price index falling 0.3% over the year.

Eyes now turn to tomorrow's national accounts, where GDP is expected to drop by over 5%, the largest ever contraction.

Looking to compare low-rate, variable home loans? Below are a handful of low-rate loans in the market.

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 19, 2021. View disclaimer.

RBA Governor Phillip Lowe said economic recovery was occurring across the nation, but would be bumpy and uneven as a result of the Victorian COVID outbreak, especially when it came to jobs. 

"Employment increased in June and July, although unemployment and underemployment remain high," Dr Lowe said.

"The virus outbreak in Victoria and subdued growth in aggregate demand more broadly mean that it is likely to be some months before a meaningful recovery in the labour market is underway.

"In the Bank's central scenario, the unemployment rate rises to around 10% later in 2020 and then declines gradually to be still around 7% in two years' time."

Dr Lowe added wage growth and inflation would remain stunted for at least the immediate future. 

"Wage and prices pressures remain subdued and this is likely to continue for some time," he said.

"Inflation is expected to average between 1 and 1.5% over the next couple of years."

The central bank also announced it was expanding its additional funding to Authorised Deposit Institutions (ADIs), up until at least the end of June of next year.

Dr Lowe said ADIs had drawn $52 billion of this extra funding already.

"Today's change brings the total amount available under this facility to around $200 billion," he said. 

"This will help keep interest rates low for borrowers and support the provision of credit by providing ADIs greater confidence about continued access to low-cost funding."

Record low cash rate keeps lending affordable 

CoreLogic Head of Research Tim Lawless said the record low 0.25% cash rate was helping people to continue borrowing money to purchase homes.

"The low cash rate has helped to bring mortgage rates down to record lows; new loans for owner-occupiers are attracting an average variable mortgage rate around 2.7%, with fixed rates even lower," Mr Lawless said.

"Such a low cost of debt has been a key factor in supporting housing demand and helping to insulate housing values. 

"Through the pandemic to date, housing values nationally have slumped by only 2.0% and housing activity has trended only about 5% lower than a year ago over the past three months."

Mortgage Choice CEO Susan Mitchell said the low cash rate and current housing market created a unique opportunity for savvy buyers. 

“As we enter what will be an unusual Spring selling season, opportunities remain for first home buyers who are ready to put their foot on the property ladder," Ms Mitchell said.

"The low cash rate continues to drive historically low home loan interest rates.

"This coupled with unprecedented levels of Government support in the form of grants and incentives creates opportunity for prospective buyers."


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.

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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.

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