RBA holds the cash rate at 0.25% for July

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on July 07, 2020
RBA holds the cash rate at 0.25% for July

Photo by Mateusz Glogowski on Unsplash

Australia's central bank has held the cash rate at 0.25% for July.

The announcement comes as little surprise, with recent comments from the Reserve Bank of Australia (RBA) suggesting it would be some time before the rate was changed.

The central bank has indicated it has no appetite for negative interest rates and there would be no hike in the rate until progress towards full employment was made. 

July marks the third consecutive month the RBA has left the rate unchanged after a tumultuous March saw two cuts, as well as the implementation of a quantitative easing (QE) program.

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

Variable
More details
  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws

Variable Home Loan (LVR < 70%)

  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

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 August 10, 2022. View disclaimer.

RBA Governor Phillip Lowe said the Australian economy was experiencing its worst contraction since the Great Depression but there were signs of improvement. 

"Conditions have, however, stabilised recently and the downturn has been less severe than earlier expected," Dr Lowe said.

"While total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely.

"There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country."

Despite this, Dr Lowe said fiscal and monetary support would be required for some time, as a return to normality was some way off. 

"Notwithstanding the signs of a gradual improvement, the nature and speed of the economic recovery remains highly uncertain," he said.

"Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans.

"The pandemic is also prompting many firms to reconsider their business models. As some businesses rehire workers as demand returns, others are restructuring their operations." 

No surprises from the RBA 

Mortgage Choice Chief Executive Officer Susan Mitchell said the RBA's decision came as little surprise, with the low cash rate supporting a low cost of borrowing, which in turn supported activity in the home loan market. 

"Lenders have been pulling out all stops to compete for market share and over the last few months, we have seen cashback offers and interest rates lowered across both variable and fixed-rate home loan products, Ms Mitchell said.

"This fierce competition has encouraged a vast number of borrowers to switch their home loan providers and refinance their loans."

Ms Mitchell said the economic climate and abundance of extremely low rates had a huge number of borrowers fixing their home loan.

"Mortgage Choice data shows that 33% of borrowers opted to fix either part or all of their home loan interest rate in the month of June, up from the three month average of 14% to February 2020." 

September remains a concern

CreditorWatch chief executive Patrick Coghlan said despite the gradual improvement in economic conditions, the Government and the RBA needed to support the small and medium-sized business sector. 

"While positive sentiment has increased in recent weeks as the economy and trade starts to open up, the big concern is what happens in and around September when the stimulus packages potentially come to an end – namely, Jobkeeper, Jobseeker, rental abatement, a home loan repayment reprieve, insolvency/bankruptcy legislation and safe harbour changes, Mr Coghlan said.

"There’ll be a serious shock to the economy as people are once again forced to start paying the bills and/or stop receiving government incentives."

He said business owners would need to start looking at whether they can survive and company directors needed to act diligently to not rack up debt they couldn't repay. 

"Currently, there are plenty of businesses out there that should be initiating wind up or at least engaging with a restructuring specialist or banker," he said.

Ms Mitchell meanwhile said all eyes would be on the government to see if they would extend JobKeeper and JobSeeker past their September end date. 

“Unless we see a dramatic change in economic indicators, we can expect to see the Reserve Bank’s policy setting to remain in place for a long time," she 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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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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