How will the RBA cash rate cut affect you?

Marc Terrano 4 February 2015
interest-rates-cut

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Find out how the rate cut from the RBA will affect you – whether you own a home or are still saving for one

LATEST: Which banks are passing on the August 2016 RBA interest rate cut?
If you have a banking product – from a fully fledged package home loan to a simple savings account – news of the RBA cash rate cut will soon be on your mind. While lenders and savings institutions don't base their interest rates completely around what the RBA board do with the official cash rate, which is announced on the first Tuesday afternoon of each month (except for January), Australians tend to wait with bated breath to see how they will respond.

Has your lender passed on the full rate cut?

The table below shows how Australia's lenders have responded to the latest move to trim the official cash rate on Tuesday 5th May 2015. If your lender isn't here you can check back soon, as we're actively monitoring lenders and will post up rate announcements as they come through.

LenderRate cutEffective dateFIN_Logo_500x161
Australian Military Bank-0.22%Sunday 31 MaySee latest rates
Adelaide Bank-0.20%Monday 25 MaySee latest rates
ANZ-0.25%Friday 8 MaySee latest rates
Bank of Melbourne-0.20%Monday 18 MaySee latest rates
Bank of Queensland-0.20%Tuesday 26 MaySee latest rates
Bank Australia (form. bankmecu)-0.25%Friday 15 MaySee latest rates
bankSA-0.20%Monday 18 MaySee latest rates
BankVic-0.25%Monday 11 MaySee latest rates
Bankwest-0.17%Tuesday 19 MaySee latest rates
Bendigo Bank-0.20%Monday 25 MaySee latest rates
Commonwealth Bank-0.20%Wednesday 13 MaySee latest rates
Comtax-0.20%Monday 1 JuneSee latest rates
CUA-0.25%Thursday 14 MaySee latest rates
Firstmac-0.25%Monday 25 MaySee latest rates
G&C Mutual-0.25%Monday 11 maySee latest rates
Greater Building Society-0.25%Friday 15 MaySee latest rates
Heritage Bank-0.20%Monday 18 MaySee latest rates
Horizon Credit Union-0.25%Monday 1 JuneSee latest rates
Homeloans.com.au-0.22%See latest rates
HSBC-0.25%Monday 18 MaySee latest rates
Hume Bank-0.25%Thursday 14 MaySee latest rates
IMB-0.20%Monday 18 MaySee latest rates
iMortgage-0.20%Wednesday 13 MaySee latest rates
ING DIRECT-0.25%Friday 15 MaySee latest rates
Loans.com.au-0.25%Tuesday 5 MaySee latest rates
ME Bank-0.25%Friday 22 MaySee latest rates
Mortgage House-0.20%Monday 25 MaySee latest rates
NAB-0.20%Wednesday 13 MaySee latest rates
Northern Inland Credit Union-0.25%Monday 1 JuneSee latest rates
Pepper-0.25%Monday 11 MaySee latest rates
RAMS-0.20%Friday 22 MaySee latest rates
St.George Bank-0.20%Monday 18 MaySee latest rates
State Custodians-0.25%Friday 29 MaySee latest rates
Suncorp-0.20%Friday 15 MaySee latest rates
The Mutual-0.25%Monday 18 MaySee latest rates
UBank-0.20%Friday 15 MaySee latest rates
Westpac-0.22%Monday 18 MaySee latest rates
WSCU-0.20%Monday 1 JuneSee latest rates

Source: finder.com.au, ranked alphabetically. Dates may vary for existing customers.

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How will the official cash rate affect you?

  • Home owners. A rate cut, if passed on by your lender, could see your repayments drop. On a loan of $300,000 over 30 years, with a rate of 5.9% p.a., a 0.25% rate cut could see your repayments drop by just under $48. It should be noted that lenders will only pass on the rate cut to borrowers with variable home loans. While a lender will usually discount fixed rate home loans sometime after a rate cut, those already locked into a fixed rate won't be able to benefit from the rate change. On the plus side, if rates increase, these borrowers are also protected from this rise. Use our loan calculator to find out what a rate cut could mean for you.
  • Home buyers. A rate cut can mean a few things if you're searching for a home. Firstly, as home loan rates are lower, the cost of a home loan when you do find a property will be lower. On the negative side, others may also choose to enter the market because borrowing costs are lower. This can drive up property prices and increase competition within other buyers, which makes it harder for your offer to be accepted by the seller.
  • Savers. Savings rates can also be dropped by lenders, meaning the benefits of earning interest on your savings as you save up your deposit will be reduced. If you're a saver, a rate cut could see your savings account rates dropped. If you have a term deposit account, you'll be safe from this as your rate is locked in, much like a fixed rate home loan. Ensure you compare savings accounts rates after any RBA rate cut so you get the best rate for your savings.
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How much will a rate cut save me on my mortgage?

The calculator below can be used to work out how much your loan repayments will change after a rate cut. Simply type in the details of your loan, including the length of the loan, the rate you're paying (you can find this on your latest home loan statement) and the loan amount, and you can see how much a rate cut will decrease your repayments by.

Why does a lower cash rate mean lower home loan rates?

When the RBA decides to drop rates, this makes it cheaper for banks to borrow money, meaning they can lend out money at a cheaper rate. This in turn means borrowers can borrow more, or spend less of their income towards their home loan, and this in turn impacts on the economy again as consumers spend more.

Rate cuts can be caused by many factors, including:

  • Inflation. Inflation and the official cash rate share an 'inverse' relationship. If inflation is rising above the target, the RBA could raise rates to curb it, as this will encourage Australians to save rather than spend. On the other hand, an inflation rate that is considered modest could allow the RBA to cut rates if need be, as personal disposable income is increased.
  • Global economic factors. The Australian dollar can at times dominate discussion about what the RBA will decide regarding the cash rate. If the Australian dollar needs to drop in value, the RBA could cut the rate to encourage this.
  • Gross domestic product (GDP). This is essentially the output in dollar terms that a country produces in goods and services within a year. It is calculated by adding government spending, plus business investment, plus consumer spending and exports minus imports. If the cash rate is lowered, it means that GDP needs to increase as the economy is producing below equilibrium.

What if my lender hasn't passed on the rate cut?

Some lenders might not pass on the full cut to all of their loan products, so be sure to contact your lender to find out if your rate will drop and when. If your lender doesn't show any intention of passing on the rate cut, and hasn't for a period now, then you may find that your once competitive home loan is getting more expensive, it may be the time to consider refinancing.

Some questions to ask yourself are:

  • What features are working best for me?
  • Is there any value in refinancing?
  • Are there any other debts I wish to consolidate while interest rates are low?

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