May 03, 2016
A year since the last rate cut, the Reserve Bank of Australia has taken the cash rate to a new historic low of 1.75%.
The Board has been quite conservative over the past year, but with the latest inflation figures coming in well below a healthy level of 2–3%, it could not maintain this neutral stance. Low inflation has been a cause for concern for the last few months, and figures from the Australian Bureau of Statistics showed that CPI fell by 0.2% in the March quarter, taking core inflation down to 1.6%.
In his statement, Governor Glenn Stevens said the global economy is growing and the Australian economy is rebalancing following the end of the mining boom. Speaking about inflation, he explained: “These results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”
While many were worried that a cut to interest rates could spark increased activity in Sydney and Melbourne – where prices skyrocketed last year – the Board decided these markets are now stable enough to withstand a lower cash rate. This comes after months of tighter lending standards.
Despite the decision, however, there is no promise that all lenders will drop their interest rates. This time last year, just 36% of lenders passed on the full rate cut. If you are eager to save money on your loan, now is the time to either speak to your lender about refinancing or chat to me about finding a better deal.
NAB, Commonwealth Bank, Bank of Queensland and Westpac have accounced plans to cut interest rates by 25 basis points. ANZ will reduce its variable home loan rate by just 19 basis points. Smaller lenders, however, are incredibly competitive right now and have some of the lowest interest rates available.
So whether you are looking to buy, invest or refinance, now may be the time to review your options. If you already have a mortgage, I recommend maintaining your current repayments in order to save on interest in the long term.
Looking forward, economists are already predicting there will be another rate cut this year. This latest decision may have come just hours before the announcement of the federal budget, but it is unlikely that we will see any further cuts before the federal election in July.
The Brisbane property market stats you need to know:
- Official cash rate: 1.75%
- Brisbane median house sale price (March): $675,000
- Brisbane median unit sale price (March): $475,000
- Auction clearance rate: 48%
- Best available variable interest rate: 3.98%
- Best available fixed interest rate: 3.99% (for a three-year term)
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