November 03, 2020
The Reserve Bank of Australia (RBA) has today made the decision to lower the cash rate target by 0.15% to 0.10% at its November monetary policy meeting.
Speaking about the RBA’s decision, Mortgage Choice CEO Susan Mitchell said, “The Reserve Bank has delivered the third cash rate cut this year and commenced a new era of monetary policy in Australia by announcing its quantitative easing program."
“Today’s decision will come as welcome news to families across the country in the lead up to the Christmas period who are looking to save on their home loan interest repayments. However, it remains to be seen if lenders pass on any of today’s rate cut.”
“Regardless of how much variable rates drop in response to the latest cash rate cut, the reality is that borrowing money has never been cheaper - the home loan market is extremely competitive right now and we’re seeing some fixed rate loans that are cheaper than variable rates. Mortgage Choice home loan approval data shows that the trend towards fixed rates remains strong, with 32% of borrowers choosing to lock in part or all of their rate in October.”
“The decision to lower the cash rate makes sense given the extreme uncertainty in the global economy. Governor Guy Debelle recently said that Australia was technically out of a recession, despite the conditions in Victoria, however recent data revealing persistently low inflation and high unemployment, shows we have a long way to go.”
“In an early sign that the housing market may be rebounding from the impacts of the COVID-19 pandemic, the CoreLogic Hedonic Home Value Index revealed positive month-on-month growth in October. National dwelling values rose 0.4% over the month, with every capital city apart from Melbourne recording a rise in values.
“In more encouraging news, the Westpac-Melbourne Institute Index of Consumer Sentiment surged in October to the highest level since July 2018. The rise in sentiment was attributed to the response to the Federal Budget, the success in containing the COVID-19 outbreak and the expectation that the RBA would cut the cash rate, as it has done today.
“Regardless of whether lenders pass on the cash rate cut to variable rate home loans, my advice is to ensure you’re taking advantage of the competitive market. If you’re on a variable interest rate, check to see what rate you’re paying and ask your mortgage broker or lender if they can get you a better deal. If your interest rate has dropped and you’re in a position to pay beyond the minimum repayment, I encourage you to keep your repayments at the same level to pay your loan down faster,” concluded Ms Mitchell.