Yesterday, the Reserve Bank of Australia (RBA) cut the official cash rate by 0.25pc to a new record low of 1.25pc in a widely predicted move to stimulate the economy. With clearly articulated aims to reduce unemployment and reach inflation targets, the RBA has been under mounting pressure to stimulate a faltering economy.
"The main domestic uncertainty continues to be the outlook for household consumption, which is being affected by a protracted period of low income growth and declining housing prices." Reserve Bank Governer Philip Lowe said in a post-meeting statement.
So what does this mean for borrowers? The cut will free up an extra $60 per month for a typical mortgagee, however it will depend on lenders. Records indicate that the big banks have only passed on a full rate cut to customers half the time since 2011.
At the time of writing CBA and NAB had indicated the full 0.25 basis points in rate cuts would be applied to standard variable rates while Westpac will pass on 0.20pc for customers on principal and interest repayments and 0.35 basis points for those on interest only. ANZ will pass on just 0.18pc.
From every angle, the competition between lenders is heating up and that's good news for borrowers with significant savings to be made, and with post-election consumer confidence on the increase Australians are already seeing first home buyers, investors and refinancers back in the market.
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