In the last two months we have seen the Reserve Bank of Australia (RBA) reduce official interest rates by 0.50%.
While the June move by the RBA was widely expected, July came as a bit of a surprise. The last time we saw two consecutive rate reductions was back in 2012 and it was the concerns over the world economy that influenced these rate movements.
Seven years on, persistent downside risks in the world economy coupled with subdued inflation and unemployment levels have resulted in similar rate reduction movements.
The banking sectors response to the movement has been largely accommodating with the majority of rate cuts being passed onto variable rate mortgage holders.
For our customers with variable rate home loans you should expect to save at least $430 annually for every $100,000 of borrowing.
The chart below shows the rate movements since June 2019 for Owner Occupied loans with principle and interest repayment terms.
Where to from here for the RBA?
To be blunt, we are getting to the pointy end of the Reserve Banks ability to implement policy that results in economic growth.
If the desired economic stimulation doesn’t take effect, the government will be searching for alternative means to improve performance which can only really come from fiscal measures (Government spending and taxation). Either way there are some interesting times ahead for Australia.
For all the negative market news that you may have seen recently, we can honestly say that our customers seem to be really well positioned. We’re prompting them to take advantage of the low interest rate environments and are make inroads on their debt repayments.
Consequently, we have seen an influx of refinance applications and interest rate review enquiries. We’re committed to completing annual reviews on all client accounts but please contact us if you would like a check in now.
Others News & Updates this month: