The Reserve Bank of Australia released its decision today, just hours before the Federal Budget for 2016/17 is due to be handed down, to lower the cash rate by 25 basis points to 1.75% for May 2016.
Their decision comes following division among Australia’s leading economists as to whether a rate cut would take place. The 0.25% cut now puts the current cash rate at a record-low after 12 months of being held at 2.0% which was also a record low for Australia.
Today’s announcement is great news for existing and potential home owners, with Canstar estimating that the rate cut will save home owners $72 per month on a $500,000 loan.
In releasing their decision, the board explained the rate cut by referencing lower than expected inflationary pressures. They explain that funding costs for high quality borrowers remain low and that monetary policy remains accommodating.
Glen Stevens, Governor of the Reserve Bank, says in his statement that effects of supervisory measures are strengthening lending standards and the potential risks associated with lower interest rates are significantly less. You can read the full decision and statement by Glenn Stevens here.
The biggest question now is whether or not bank and non-bank lenders will pass on rate cuts to their customers. National Australia Bank were very quick to act today, announcing just minutes after the RBA decision that they will be dropping their standard variable home loan rate by the full 0.25%.
Other bank and non-bank lenders are expected to make announcements over the coming days regarding any changes to their interest rates.
Now is the perfect time to revisit your financial solutions to make sure that you are utilizing the most suitable product and interest rate available to you at this time. To make sure that you are getting the most out of your financial solutions in a changing market we encourage you to contact iconic via phone on 1300 663 943 or via email to firstname.lastname@example.org. You can also feel free to contact us if you have any questions regarding the RBA’s decision and how it affects you.
Thanks for taking the time to read this update, and we will be back with you tomorrow for an update on the Federal Budget 2016/17.