Reserve Bank of Australia lowers official cash rate

Interest rate announcement – June 2019
Last month, the Reserve Bank of Australia (RBA) held the cash rate at its record low of 1.5 per cent for the 30th month in a row, but minutes of the May meeting showed board members explicitly acknowledged the likelihood of a cut if unemployment did not fall. Official unemployment data shows that the unemployment rate rose in April to a worse than expected 5.2%. The RBA has reduced the cash rate by 25 basis points to 1.25%.

Will my bank pass on the interest rate cut?

As the official cash rate has remained at 1.50% for 30 months, the public and political pressure would be too high the lenders to hold it all back. Indeed, the Treasurer, Josh Frydenberg has been very vocal about his expectation that lenders should pass on the full value of any cut. However, despite this pressure, some borrowers may not see the full cut passed on. If you are unhappy with what your lender passes on, you can call and ask for a larger rate cut and if this is still not enough, there are plenty of lenders with very competitive rates and products that may suit you better than the loan you are currently on.

How low can rates go?

Many economists feel that the RBA will need to lower the official cash rate even further this year with many expecting another decrease as soon as August. If we look at past rate cuts, they have generally been separated by a two-month gap of no change. This has been so the RBA can measure the impact it has had and see if it has improved market conditions. If there has not been a significant enough improvement, we could see another rate cut by September. This would likely bring the official cash rate down to 1%.

What other measures can the RBA take other than lowering the official cash rate?

Westpac chief economist Bill Evans, was the first economist from one of the four major banks to predict two rate cuts this year. A fortnight ago, said he believes the floor for the cash rate would certainly be 0.50% and sees that Quantitative Easing will be a more effective policy tool thereafter.

Quantitative easing is a monetary tool where central banks buy government bonds and other assets to inject cash into the economy and increase the money supply which encourages lending and investment.

Latest interest rate movement

According to website Canstar, 34 lenders dropped their mortgage interest rates in May which amounted to 495 different loan product rate changes. Of these, 90% where reductions to fixed home loan rates and only 10% to variable home loans.

There are some very competitive fixed rates available at the moment with a few lender on our panel now offering 3.39% for a two or a three year fixed term on an Owner Occupied property loan with Principle and Interest repayments. Only time will tell how low rates can go.

Get the right advice

When it comes to your mortgage, it needs to work for you. That means the loan should have the features, flexibility and fees that are the most appropriate for your needs and suit your personal situation.

Fixed interest rates have again seen large movements this month, especially the 2 and 3 year fixed rates., Bellow are the cheapest currently on offer to us from our panel of 30 plus lenders.

If you’re interested in learning more, why not have a no-obligation, free chat with Tedy Ferreira, our Harvest Property Loans Mortgage Broker, who can point you in the right direction?