The decision from the Reserve Bank (RBA) to cut the rate by 15 basis points was almost universally expected by economists, with the market pricing in an 84% chance of a cut.
Recent comments from RBA Governor Phillip Lowe set the scene for a cut, after he suggested one would be more effective now as the economy was opening up, instead of at the height of the pandemic when restrictions were in place.
It's the first time the RBA has cut the rate since March, where it made two cuts in the month and implemented its quantitative easing (QE) program, both historic firsts.
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 | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $2,408 | Principal & Interest | Variable | $0 | $530 | 70% | Featured Online ExclusiveUp To $4K Cashback |
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5.99% p.a. | 5.90% p.a. | $2,396 | Principal & Interest | Variable | $0 | $0 | 80% | Featured Apply In Minutes |
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6.14% p.a. | 6.16% p.a. | $2,434 | Principal & Interest | Variable | $0 | $250 | 60% | Featured Unlimited Redraws |
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Melbourne Cup Day is somewhat of a cash rate change tradition for the central bank, as it gives time for savings to flow through to households and retailers before Christmas.
The RBA also announced a reduction in the interest rate on new drawings under the Term Funding Facility to 0.1%, as well as the purchase of $100 billion of government bonds.
The central bank said the Board was committed to supporting the recovery of the Australian economy from the pandemic.
"With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs," it said.
"Encouragingly, the recent economic data have been a bit better than expected and the near-term outlook is better than it was three months ago.
"Even so, the recovery is still expected to be bumpy and drawn out and the outlook remains dependent on successful containment of the virus."
The RBA said it has put the high rate of unemployment as an important national priority.
"Today's policy package, together with the earlier measures by the RBA, will help in this effort.
"The RBA's response is complementary to the significant steps taken by the Australian Government, including in the recent budget, to support jobs and economic growth."
"Borrowing has never been cheaper"
Mortgage Choice CEO Susan Mitchell said today's decision would come as welcome news to families across the country in the lead up to Christmas, but wasn't sure lenders would pass on the cut.
“Regardless of how much variable rates drop in response to the latest cash rate cut, the reality is that borrowing money has never been cheaper - the home loan market is extremely competitive right now and we’re seeing some fixed rate loans that are cheaper than variable rates," Ms Mitchell said.
"Mortgage Choice home loan approval data shows that the trend towards fixed rates remains strong, with 32% of borrowers choosing to lock in part or all of their rate in October.”
Ms Mitchell said regardless of if lenders passed on the cut, she advised people to ensure you're taking advantage of the competitive market.
"If you’re on a variable interest rate, check to see what rate you’re paying and ask your mortgage broker or lender if they can get you a better deal," she said.
"If your interest rate has dropped and you’re in a position to pay beyond the minimum repayment, I encourage you to keep your repayments at the same level to pay your loan down faster.”
Tim Lawless, Head of research at CoreLogic, said it was highly likely lenders would pass on the cuts.
"If passed on by the banks, which is highly likely, we will see mortgage rates fall further from their already record lows," Mr Lawless said.
"Historically cuts to interest rates have fuelled housing market activity and generally aligned with upwards pressure on dwelling prices.
"With the trend in housing values already rising around most areas of the country, there is a good chance lower rates could see momentum building across the nation’s most valuable asset class."
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