Will the RBA cut interest rates in November?

author-avatar By on November 02, 2020
Will the RBA cut interest rates in November?

Photo by Noah Silliman on Unsplash

A Melbourne Cup RBA rate cut looks like a sure bet.

** BREAKING: The RBA has just announced a rate cut. Find out if your lender is passing it on. **

Tomorrow's Reserve Bank board meeting is easily one of the most anticipated in recent months with the possibility of a rate cut looking extremely likely following comments from RBA Governor Philip Lowe.

"When the pandemic was at its worst and there were severe restrictions on activity we judged that there was little to be gained from further monetary easing," Dr Lowe said in a recent speech.

"The solutions to the problems the country faced lay elsewhere.

"As the economy opens up, though, it is reasonable to expect that further monetary easing would get more traction than was the case earlier."

The results of tomorrow's Reserve Bank Board meeting will be announced minutes before the Melbourne Cup kicks off in what is shaping up to be a very big news day, with the US presidential election also being held the next day Australian time. 

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 27, 2021. View disclaimer.

Many economists expect the RBA will cut the official cash rate by 15 basis points in November to 0.10%, taking it to near negative interest rates.

See also: How would negative interest rates work in Australia?

NABWestpac, and 14 of 24 Bloomberg-polled analysts expect a November cash rate cut.

Economists had been expecting an October rate cut, but quickly changed their forecasts when they realised it would coincide with the release of the Budget.

Commonwealth Bank chief economist Stephen Halmarick said the RBA is likely to push further into what he calls "conventional unconventional monetary policy space" at tomorrow's Board meeting.

“This easing is expected to involve a cut in the three key interest rates – the cash rate target, the 3-year bond yield target, and the Term Funding Facility target from 0.25% to 0.1%,” Mr Halmarick said.

“Critically, this easing of monetary policy is expected to be implemented at the same time as the RBA looks set to revise upwards their economic forecasts given the run of better economic data.”

Not everyone expects an RBA rate cut tomorrow, though they are in the minority.

ING regional head of research Asia-Pacific Robert Carnell says the RBA is more likely to introduce more Quantitative Easing measures than they are to further reduce the cash rate. 

"As we head towards the 3 November Reserve Bank of Australia (RBA) rate meeting, we find ourselves almost alone in not expecting any further reduction in the cash rate," Mr Carnell said.

"We aren't saying we don't think the RBA will do nothing at the next meeting, by any means. We just think they would prefer to use a different tool. 

"Our preferred approach would be for the RBA to adjust its current yield curve control (YCC), which to be clear, is already a form of constrained Quantitative Easing (QE)."

Mr Carnell said a further reduction in the cash rate wouldn't have much impact on the economy.

"It would be hard to argue that a further 15bp cut in the cash rate target and 10bp on the exchange settlement (ES) rate would have a meaningfully positive impact on the economy or the labour market," he said. 

Will the banks pass on a rate cut?

As speculation of an RBA rate cut has been mounting over the last month, interest rates on savings accounts have been on the chopping block as banks preemptively cut ahead of tomorrow's decision.

Savers are expected to cop another blow if the RBA cuts rates tomorrow.

As for home loans, AMP chief economist Shane Oliver said he expects banks will pass on the rate cut to borrowers.

"The rate cut will depress variable mortgage rates by around 0.15% (15 basis points), as it will be hard for banks not to pass it on in full given the cheap funding they are getting from the RBA," Mr Oliver said in a note.

With many borrowers still struggling to make their mortgage repayments due to COVID, banks could cop backlash if they choose not to pass on more relief to borrowers in the form of a cut.

Switzer Financial Group Director Peter Switzer said an RBA rate cut tomorrow will set the tone for home loan interest rates.

"The RBA is like the godfather of banks. This rate cut is an offer of “when we cut, you cut” and is one the banks can’t refuse," Mr Switzer wrote on his website.

"A lower cash rate will cement more low-fixed rate home loan rates of interest, which right now are as low as 2.59% fixed for five years at UBank!

"In all likelihood, a cut will keep rates lower for longer, unless we get an extremely huge growth spurt here and worldwide in 2022."


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
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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