RBA cash rate decrease

RBASepWhat does a drop in the RBA’s official cash rate mean for your finances? Find out here.

Interest rates - we all know what they mean and that they apply to financial products like home loans and savings accounts, but how do banks decide on the rate they charge their customers? What does it mean for everyday Australians when interest rates fall?

Although interest rates can seem like quite a confusing concept to wrap your head around, they’re actually quite easy to understand once you know a few basic points. The perfect place to begin any explanation of interest rates in Australia is with the Reserve Bank of Australia’s (RBA) official cash rate.

What is a drop in the cash rate?

The RBA is Australia’s central bank that is responsible for maintaining a strong financial system and ensuring the economic prosperity and welfare of all Australians. To do this, the RBA is responsible for Australia’s monetary policy and sets the interest rate for overnight loans that it provides to commercial banks. This is known as the official cash rate, and when the RBA makes changes to this rate, banks and financial institutions around Australia follow suit.

On the first Tuesday of every month (barring January), the RBA board meets to decide whether to raise the rate, drop it or keep it at the same level. This rate decision is based on a wide range of actors including consumer confidence, the strength of the economy, the housing market and the performance of the Aussie Dollar.

When the rate moves, it usually does so in increments of 0.25 per cent. When the RBA lowers interest rates, this is referred to as a drop in the cash rate.

What does an RBA cash rate decrease mean for me?

A decrease in the RBA’s cash rate can have a number of implications for Australian consumers, with rate drops influencing different financial products in different ways.

Home Loans

Most lenders will typically pass on the RBA’s rate cut to their own home loans, although some will be a little more tardy than others. If you have a variable rate loan and your lender passes on the rate cut, you’ll be able to enjoy a noticeable reduction in the amount of interest you have to repay toward your loan.

However, if you’re locked into a fixed rate loan, you’ll have to wait until the fixed rate period ends before you can take advantage of lower rates. When the fixed period is up, you may wish to negotiate a better rate or see if another lender might be willing to offer you a more attractive deal.

Another effect of a cash rate decrease is that more people are likely to enter the property market. As lower interest rates means home loans become more affordable, home buyers will likely experience increased competition in the real estate market. This competition can drive prices up and make it more difficult for first home buyers to get a foothold in the property market.

Compare current home loan offers

Rates last updated January 24th, 2019
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.59%
3.61%
$0
$0 p.a.
90%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.
3.69%
3.72%
$445
$0 p.a.
90%
NSW and ACT customers only. Get a special discount for a limited time when you open an IMB Transaction Account.
3.54%
3.69%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate for home buyers with a 20% deposit. This product has a 100% offset account.
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150000 get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.59%
3.63%
$0
$0 p.a.
90%
Get a low variable interest rate and buy a property with just a 10% deposit. 100% offset account attached.
3.49%
3.64%
$0
$10 monthly ($120 p.a.)
70%
A very low variable interest rate for home buyers with a 30% deposit. This product has a 100% offset account.
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2000000 from a convenient online lender.

Compare up to 4 providers

Credit Cards

If banks agree to pass on the interest rate cut and lower their credit card interest rates - which doesn’t always happen - this can be good news for cardholders. A lower interest rate on your card means you will have to pay less interest on the purchases you make, which means it will be more affordable to spend your money and easier to pay off your debt.

Decreases in the cash rate are designed to encourage consumer spending by making credit card purchases more affordable. However, if your bank doesn’t lower your credit card interest rates, it may be worthwhile looking for a different card that offers a better rate and other attractive features. You may even be able to take advantage of a 0% p.a. introductory rate on balance transfers to help you get out of debt quicker.

Compare credit cards

Rates last updated January 24th, 2019
Name Product Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee Product Description
Citi Clear Platinum Credit Card
12.99% p.a.
0% p.a. for 14 months
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Platinum Credit Card with a Low Interest Rate *
Offers a 0% p.a. for 14 months balance transfer and $0 first year annual fee. Plus, insurance covers and Citibank Dining Program perks.
ANZ Low Rate
12.49% p.a.
0% p.a. for 15 months
$58 p.a.
Long-Term Balance Transfer Offer*
Save with a 0% p.a. introductory rate on balance transfers for 15 months with no BT fee. Plus a low 12.49% p.a. interest rate on purchases.
Westpac Low Rate Card
13.49% p.a.
0% p.a. for 24 months with 1% balance transfer fee
$0 p.a. annual fee for the first year ($59 p.a. thereafter)
$0 First Year Annual Fee & Balance Transfer Offer*
Offers a 0% for 24 month balance transfer option, first year annual fee waiver and a competitive purchase rate.
HSBC Platinum Credit Card
19.99% p.a.
0% p.a. for 22 months
$129 p.a.
Annual Fee Refund & Balance Transfer Offer*
0% p.a. for 22 months on balance transfers with no BT fee. Plus, a yearly annual fee refund when you spend $6,000 and 2 lounge passes per year.
Bankwest Breeze Classic Mastercard
0% p.a. for 6 months (reverts to 12.99% p.a.)
0% p.a. for 26 months with 2% balance transfer fee
$0 p.a. annual fee for the first year ($79 p.a. thereafter)
0% p.a. for 26 months Balance Transfer Offer*
Pay 0% p.a. interest on purchases for the first 6 months and 0% p.a. on balance transfers for 26 months. Plus, a $0 first year annual fee.
St.George Vertigo Platinum
12.74% p.a.
0% p.a. for 26 months with 2% balance transfer fee
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Low Rate Platinum Credit Card Offer
Offers a long-term balance transfer, $0 first year annual fee, complimentary travel insurance and access to a 24/7 personal concierge service.
Suncorp Clear Options Platinum Credit Card - Online Offer
20.74% p.a.
0% p.a. for 18 months
$49 p.a. annual fee for the first year ($129 p.a. thereafter)
Discounted First Year Annual Fee & Balance Transfer Offer*
Save with a 0% balance transfer offer and earn up to 60,000 Bonus Reward Points. Plus, a discounted first year annual fee when you apply online.
Citi Platinum Credit Card - Exclusive Offer
0% p.a. for 13 months (reverts to 20.99% p.a.)
0% p.a. for 13 months
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
0% p.a. Purchase & Balance Transfer Offers*
finder Exclusive:
Save with 0% interest on purchases and balance transfers for 13 months (with no BT fee). Plus, a discounted $49 annual fee for the first year.
Westpac 55 Day credit card - Online Offer
0% p.a. for 13 months (reverts to 19.84% p.a.)
$0 p.a. annual fee for the first year ($30 p.a. thereafter)
Save with 0% p.a. interest for the first 13 months on purchases and a $0 first year annual fee.
Citi Simplicity Card
19.99% p.a.
0% p.a. for 6 months
$0 p.a.
Low Intro Balance Transfer Interest Rate with No Annual Fee
Get 0% p.a. interest for up to 6 months on balance transfers with no balance transfer fee. Plus, a $0 annual fee for life.

Compare up to 4 providers

Savings Accounts

If you’ve got money tucked away earning interest in a savings account, an RBA cash rate decrease may not be the news you’ve been hoping for. You’ll want your savings balance to be earning interest at the highest rate possible, so any drop in interest rates will see the speed with which you can build a sizable savings balance slow down.

However, if your funds are locked away in a term deposit, you won’t feel the effect of the rate decrease until your deposit matures and you can access your funds. Of course, the fixed nature of a term deposit means you won’t be able to enjoy the benefits of any rate hikes should they occur.

But with careful planning and a sensible approach to your personal finances, an RBA cash rate decrease doesn’t have to cause any pain for your hip pocket.

Compare Savings Accounts

Rates last updated January 24th, 2019.

HSBC Flexi Saver Account

Variable interest rate was changed from 2.75% to 2.50%

May 8th, 2015

Bankwest Hero Saver

Variable rate changed from 3.15% to 2.90%

October 20th, 2015

Citibank Online Saver

Maximum variable rate reduced from 3.00% to 2.85%

February 21st, 2017

View latest updates

Debbie Mariano Debbie
$
Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Monthly Account Fee
HSBC Serious Saver
Receive a maximum variable rate of 3.10% p.a. for 4 months, reverting to an ongoing rate of 1.40% p.a. when you make no withdrawals in the month. Available on balances below $1,000,000.
3.10% 1.40% 1.70% $0 $0 / $0 Go to site More
UBank USaver
Earn up to 2.87% p.a. by linking your USaver account to a UBank Ultra transaction account and transferring at least $200 per month into either account. This offer is available on balances up to $200,000.
2.87% 1.81% 1.06% $0 $0 / $0 Go to site More
RaboDirect High Interest Savings Account
Introductory rate of 3.05% p.a. for 4 months, reverting to a rate of 1.80% p.a. Available on balances below $250,000
3.05% 1.80% 1.25% $0 $0 / $0 Go to site More
AMP Saver Account
Introductory rate of 2.55% p.a. for 4 months, reverting to a rate of 2.10% p.a. Available on balances below $5,000,000.
2.55% 2.10% 0.45% $0 $0 / $0 Go to site More
Bankwest Hero Saver
Ongoing, variable 2.60% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
2.60% 0.01% 2.59% $0 $0 / $0 Go to site More
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Home Loan Offers

Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

HSBC Home Value Loan - (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Tic:Toc Live in Loan Variable Rate - Principal & Interest

Get a very low interest rate and avoid big fees. Apply online for full approval in under 30 minutes and add a 100% offset account for $10 a month.

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2 Responses

  1. Default Gravatar
    AnushaJanuary 13, 2016

    what is the impact of rate cut on shares.

    • finder Customer Care
      ShirleyJanuary 14, 2016Staff

      Hi Anusha,

      Thanks for your question. Please note that finder.com.au is an online comparison and information service and can only provide general advice.

      If you’re looking for personalised advice, we recommend you speak to a stock broker or financial planner.

      Generally a rate cut signifies that the economy is moving slowly towards it’s trough in the economic cycle. As a result, the share market usually loses value until the market peaks again.

      Cheers,
      Shirley

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