Australia's central bank meets today to discuss the possibility of a change to the cash rate. Will it cut or hold?
Following arguably the most tumultuous year in the Reserve Bank's (RBA) history, the last Board meeting of the year is likely to be the least interesting, as any change to monetary policy seems extraordinarily unlikely.
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.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
- No ongoing fees
- Unlimited redraw facility
Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
NAB economist Ray Attrill said today's RBA meeting would be somewhat of a non-event.
"The RBA’s last meeting of the year should pass without incident unless the post-meeting Statement chooses to offer some guidance on the likely fate of its QE bond buying programme beyond its currently scheduled June 2021 expiry (unlikely)," Mr Attrill said.
After reducing the cash rate to 0.10% from 0.25% in November, the RBA has stated the cash rate is at its effective lower bound and can go no further.
Very few lenders passed on the RBA's November cut to variable rates, with many instead offering sub-2% fixed rates, causing RBA Governor Phillip Lowe to urge borrowers to switch lenders if this was the case.
The central bank has also repeatedly affirmed it has no appetite for negative interest rates.
"Members agreed that, with the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances at zero, interest rates would have been lowered as far as it made sense to do so in the current environment," the RBA said in the Minutes of its November Meeting.
"They considered that there was little to be gained from short-term interest rates moving into negative territory and continued to view a negative policy rate as extraordinarily unlikely."
The RBA has also stated it will not raise the cash rate until inflation sits in its desired band of 2-3% and progress towards full employment is made.
Australia's unemployment rate is currently at 7.0% and is expected to spike around 8% in December, with annual inflation sitting at 0.7%.
Consequently, the RBA doesn't expect to raise the cash rate for at least three years.
Since June of last year, the RBA has cut the cash rate by 135 basis points, taking it to a record low.
With a less protracted recovery forecast by many economists, there has been speculation the RBA will wind back its QE program.
The RBA won't meet again after today until February.
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): Credit Union Australia, 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.
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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