RBA cuts interest rates

For the second consecutive month the RBA has cut interest rates by 0.25% to reach a record low of 1%. But with another fall predicted by the end of 2019, will we see it passed onto customers?

As interest rates fall, so to does the interest on savings accounts. It is becoming increasingly tough for banks to lower deposit rates by the standards 0.25% RBA move. The closer interest rates get to zero, the harder it is for banks to pass full rate cuts onto mortgages as they are unable to adjust for it through already low deposits. As a result, it will be interesting to see to what extent today’s rate cut will be passed on to customers.

What have been the effects of the June rate cut?

Home Owners

Although there was significant pressure from the RBA and federal government to pass on the rate cut in full, we saw a mixture of full and partial rate cuts amongst the lenders as seen in the table below. As interest rates continue to edge towards zero, banks are increasingly feeling the squeeze on their ability to pass on full rate cuts to home loan customers as profits from savings accounts and depositors fall.

Lender June Cut
AMP Banks 0.25%
ANZ Bank 0.18%
Bank Australia 0.25%
Bank of Sydney 0.20-0.25%
Bankwest 0.25%
Bendigo Bank 0.15-0.20%
BOQ 0.25%
Citi 0.25%
Commonwealth Bank 0.25%
IMB Bank 0.25%
ING 0.25%
Macquarie Bank 0.25%
ME Bank 0.25%
NAB 0.25%
Pepper Money 0.25%
Qudos Bank 0.25%
St George Bank 0.20%
Suncorp 0.20%
Teachers Mutual Bank 0.25%
Westpac 0.20%

The differentiation between lenders makes it a great time to chat with us about a potential refinance.

Looking for a new home loan or to refinance

Housing credit had it’s slowest growth rate in the 12 months to May at 3.7 per cent, however it is expected a combination of the rate cuts and a loosening of lending regulation by APRA will begin to improve towards the end of 2019 when they have time to take effect. Sluggish approval rates means it is now more important than ever to use an experienced broker.

Finding your new or next home

Improved property sentiment as well as lower interest rates and continuity of government seem to be bolstering a dwindling national property market with Australia’s two largest cities showing modest increases during June. According to CoreLogic’s home value index, there was a national fall of 0.2% – 0.1% in capitals and 0.4% regionally – however Sydney and Melbourne saw their first price rises in years, increasing 0.1% and 0.2% respectively.

Saving for a home

The June interest cuts saw several banks match or exceed the move when it comes to deposits and savers. Moving into July, we’ll see banks keeping a close eye on their deposit flow, particularly as record low returns may prompt savers to look elsewhere for higher returns. Although there are many compelling introductory offers on savings and term deposit accounts, there is concern that savers are losing out as inflation continues to outpace lowering interest rates. This is particularly true for older Australians and retirees who may rely on interest for income, as well as those saving for home deposits.

Will we see another rate cut this year?

Although we have seen rates fall at the last two rate meetings, it looks as if it will not be the last this year. Markets are predicting another 0.25 of a percentage point cut in Decemeber to see out 2019. You can view the predictions here.