The Reserve Bank of Australia (RBA) recently announced an interest rate cut to a record low of 1.25 per cent, which comes as a relief to many property owners as it has been three years since the RBA has made a move on interest rates, with some analysts expecting more cuts between August and October. But what does this mean for you? The ABC reported that the big four banks – Commonwealth Bank, ANZ, Westpac and NAB – will pass on some, if not all, of the rate cuts from June.
Here’s what was stated:
- · Commonwealth Bank will pass on the full 0.25 per cent to its variable home loan customers from June 25.·
- ·ANZ will reduce its variable home loan rate for customers by 0.18 per cent from June 14.
- ·NAB will pass on the full 0.25 per cent to its variable home loan customers from June 14.
- ·Westpac will pass on 20 basis point rate cut for most variable home loans, and 35 basis points for interest-only property investors from June 18. Westpac is also offering a 3.49 per cent five-year fixed rate for new first home buyers.
However, according to comparison site, Canstar, the smaller lenders are offering the best variable home loan rates on the market. Lenders such as Athena, RACQ, and Reduce Home Loans will be passing on the rate cut in full.
What does this mean if you’re a homeowner?
With these changes, Belle Property Head of Sales and Business Development, Nick Boyd says, it’s a good time to shop around for a better deal. "We've entered into a historically low-interest rate environment. If your home loan is with a lender that is passing on the interest rate cut, you are in a great position to get ahead on your repayments," says Nick. "If you're not, now is the time to be shopping around for a better deal."
What does it mean if you’re looking to buy?
Economists claim that if the interest rates are too high, house prices tend to be lower because people cannot afford to service their loan. With RBA's recent rate cut, property prices should stabilise, allowing people to borrow more, plus, boosting consumer confidence, which may stimulate more homes on the market. "The great news for first home buyers is that they will be able to borrow more and there may be more to choose from as people gain more confidence in the market and list their homes for sale. The downside for them is that property prices won't drop any further, but they won't go up either; they will just stabilise," says Nick.
For more information:
To keep up with the latest developments, visit: www.canstar.com.au/rba-cash-rate/