RBA Cash Rate Decrease

Rates and fees last updated on

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 December 12th, 2017
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Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.65%
3.66%
$0
$0 p.a.
90%
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.64%
3.66%
$0
$0 p.a.
80%
A basic home loan with a competitive rate and low fees.
3.69%
4.86%
$0
$395 p.a.
90%
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.58%
3.59%
$0
$0 p.a.
80%
A competitive variable rate product with low fees offered by a 100% online lender.
3.62%
3.62%
$0
$0 p.a.
80%
A discounted, competitive variable rate loan with limited fees.
3.64%
3.66%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.64%
3.67%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.54%
3.56%
$0
$0 p.a.
80%
For new home buyers only. No refinance option. A low interest variable home loan with no application fee and free redraws. Offer ends 2 January.
3.65%
3.66%
$0
$0 p.a.
90%
A competitive variable rate home loan with no application fee.
3.44%
3.45%
$440
$0 p.a.
80%
This variable loan has a sharp rate, low fees, flexible repayment options and an offset account. This loan is available for PAYG borrowers only.

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 December 12th, 2017
Name Product Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee Product Description
NAB Premium Card - Exclusive Offer
19.74% p.a.
0% p.a. for 25 months
$90 p.a.
Platinum Card with an Exclusive Balance Transfer Offer
Exclusive to finder.com.au, enjoy a no BT fee, 0% balance transfer offer for 25 months and seven complimentary insurance covers.
St.George Vertigo Platinum - Online Offer
12.74% p.a.
0% p.a. for 24 months
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Platinum Credit Card with Balance Transfer Offer
Platinum card benefits plus 0% p.a. for 24 months on balance transfers (with no BT fee) and $0 annual fee in the first year. Ends 13 December 2017.
Woolworths Everyday Platinum Credit Card
19.99% p.a.
0% p.a. for 14 months
$0 p.a. annual fee for the first year ($49 p.a. thereafter)
Supermarket Platinum Credit Card Offer
Receive a $50 eGift Card when you meet the offer criteria, a 0% p.a. for 14 month balance transfer offer and a $0 first year annual fee.
Virgin Australia Velocity Flyer Card - Bonus Points Offer
20.74% p.a.
0% p.a. for 18 months
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Up to 60,000 bonus Velocity Points with Balance Transfer Offer*
Earn up to 60,000 bonus Velocity Points in the first 3 months on eligible spend and enjoy a discounted annual fee of $64 for the first year.
HSBC Platinum Credit Card
19.99% p.a.
0% p.a. for 22 months with 2% balance transfer fee
$129 p.a.
Platinum Credit Card with a Balance Transfer Offer*
Receive a 0% p.a. for 22 months balance transfer offer and earn 1 Reward Point per $1 of eligible spend. Plus, complimentary travel insurance.
St.George Vertigo Visa - Online Offer
13.24% p.a.
0% p.a. for 18 months
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
First Year Annual Fee Waiver with Balance Transfer Offer*
Take advantage of 0% p.a. for 18 months on balance transfers (with no BT fee). Plus, $0 annual fee in the first year. Ends 13 December 2017.
Virgin Money Low Rate Credit Card
11.99% p.a.
0% p.a. for 14 months
$49 p.a.
Low Purchase Rate & Balance Transfer Offer*
Receive a discounted annual fee, $100 cashback when you meet the spend requirement and up to 14 months interest-free on balance transfers.
Citi Rewards Platinum Credit Card
20.99% p.a.
0% p.a. for 24 months with 1.5% balance transfer fee
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
0% p.a. for 24 months Balance Transfer Offer*
Earn reward Points per $1 spent, take advantage of a 0% p.a. for 24 month balance transfer offer, plus a complimentary international travel insurance.
ANZ Platinum Credit Card - Exclusive Offer
0% p.a. for 3 months (reverts to 19.74% p.a.)
0% p.a. for 12 months
$0 p.a. annual fee for the first year ($87 p.a. thereafter)
Platinum Card with 0% interest rates on purchases and balance transfers
Exclusive to finder, get 0% p.a. interest on purchases for 3 months and 0% p.a. on balance transfers for 12 months. Ends 17 December 2017.
Citi Platinum Credit Card - 100k Bonus Points
20.99% p.a.
0% p.a. for 15 months with 1% balance transfer fee
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Bonus Points & Balance Transfer Offer
Earn 100,000 reward Points, enjoy a long-term balance transfer offer, a discounted first year annual fee and complimentary travel insurance.

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 December 12th, 2017.

ANZ Progress Saver

Introductory interest rate was changed from 2.00% to 1.90%

October 31st, 2016

ANZ Online Saver

Bonus interest rate was changed from 1.60% to 1.40%

December 23rd, 2016

Westpac eSaver

Ongoing interest rate was changed from 1.25% to 1.05%

December 23rd, 2016

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
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
HSBC Serious Saver
Introductory rate of 3.00% p.a. for 4 months, reverting to a rate of 1.60% p.a. Available on balances below $1,000,000.
3.00% 1.60% 1.40% $0 $0 / $0 Go to site More
AMP Bett3r Save Account
A unique three account bundle linking individual Pay, Spend and Save accounts.
3.00% 1.50% 1.50% $0 $0 / $0 Go to site More
ANZ Progress Saver
Ongoing, variable 1.81% p.a. when you deposit $10+ each month and make no withdrawals. Available on the entire balance.
1.81% 0.01% 1.80% $0 $10 / $10 Go to site More
Westpac Life
Earn up to 2.30% p.a. interest. No monthly account-keeping fee. Set savings goals and track your progress.
2.30% 1.50% 0.80% $0 $0 / $0 Go to site More
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2 Responses

  1. Default Gravatar
    AnushaJanuary 13, 2016

    what is the impact of rate cut on shares.

    • Staff
      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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