June 2019 rate cut – Why did the Reserve Bank cut the cash rate?
On 4th June 2019, the Reserve Bank announced the cash rate would be reduced by 0.25% p.a. to a record low 1.25%p.a. The basis of this decision was to support employment growth and to attempt to boost inflation within back up into the 2-3% target range.
The low inflation rate is reflective of the fact that consumer spending is quite slow at the moment. This is expected when wage growth is quite slow and consumer confidence is battered by falling property markets. The hope from the Reserve Bank is that by cutting rates it will give consumers more confidence, as well as cash flow, to start spending again.
The other main aim of the rate cut is to reduce the unemployment rate. In layman’s terms, if interest rates are lower then businesses may gain the confidence to higher more staff. More people in work generally means more people spending money which then should push inflation back up into the target range.
This rate cut is also expected to support the Sydney and Melbourne property market’s, which have been in decline in the past 12 months.
See https://www.rba.gov.au/media-releases/2019/mr-19-15.html for the official Reserve Bank statement.
Has your lender passed on the full 0.25% p.a. rate cut?
As the last few years have shown lenders do what they want when it comes to interest rate adjustments. Unlike the old days, their home loan interest rates are no longer tied to the Reserve Bank cash rate. There have been numerous ‘out of cycle’ rate increases in recent times so I personally wasn’t expecting many lenders to pass on the full 0.25% p.a. rate cut.
Once the Reserve Bank announced the rate cut ANZ was the first major lender to make an announcement. They announced a rate cut of 0.18% p.a. which I thought confirmed my suspicions.
Since that first announcement, I have been pleasantly surprised that most lenders have passed on the full rate cut, including majors such as Commonwealth Bank (CBA) and National Australia Bank (NAB).
Below is a summary of the rate cuts announced by a large percentage of the more than 40 lenders on our panel.
Has your lender passed on the full 0.25% p.a. cut? If not it might be a good time to review your loan to find out whether there is a better deal out there for you. Feel free to get in touch for a loan review.
|Lender||Effective Date||Standard Variable Rate Decrease|
|Adelaide Bank||28/06/2019||P&I 0.20% IO 0.15%|
|AFGHL Alpha||28/06/2019||P&I 0.20% IO 0.15%|
|AFGHL Link||21/06/2019||0.20% new loans & loans settled after 31/12/2018. 0.25% for loans settled before 31/12/2018|
|AFGHL Retro||21/06/2019||0.20% new loans & loans settled after 31/12/2018. 0.25% for loans settled before 31/12/2018|
|Bank of Melbourne||18/06/2019||O/O (P&I, IO) INV (P&I) 0.20% INV (IO) 0.35%|
|Bank of Sydney||18/06/2019||0.25%|
|Bank SA||18/06/2019||O/O (P&I, IO) INV (P&I) 0.20% INV (IO) 0.35%|
|Bank of QLD||25/06/2019||0.25% (Clear Path O/O and Intro Rate 0.15%)|
|Beyond Bank||25/06/2019||0.15% to 0.25% depending on loan product|
|CUA||18/06/2019||0.10% – 0.25%|
|Resimac||26/06/2019||up to 0.18%|
|St George Bank||18/06/2019||O/O (P&I, IO) INV (P&I) 0.20% INV (IO) 0.35%|
|Westpac||18/06/2019||O/O (P&I, IO) INV (P&I) 0.20% INV (IO) 0.35%|
Patrick is a Director and a Home Loan Specialist. He has been helping Australians with home loans since 2001. Prior to working as a mortgage broker Patrick was employed by Macquarie Bank for 3 years and also worked as an accountant for a publicly listed company. Patrick holds a Bachelor of Business majoring in Accounting and sub-majoring in Finance and Marketing from University of Technology, Sydney.