Today the RBA lowered its official cash rate by 0.25% in a widely anticipated move, paving the way for more reductions in borrowing costs for Sydneysiders.
As multiple banks and lenders dropped interest rates ahead of today’s news, the Central Bank’s rate is now down to 3.60% from 3.85%.
Martin Place explained that cut number three this year (which was a unanimous vote of 9-0) was ‘appropriate’.
It was based on updated RBA forecasts which suggest that ‘underlying inflation will continue to moderate to around the midpoint of the 2–3 per cent range, with the cash rate assumed to follow a gradual easing path’.
After last month’s pause – which caught a few experts by surprise – today’s drop is wholly in line with expectations.
So, on an average loan of around $600,000, a lender’s rate cut of 0.25% will save about $1,080 a year on borrowing costs.
Most industry experts are tipping one or maybe two more cuts by the RBA this year.
The RBA dropped its rate today due in large part to the latest inflation figures – which were, again, encouraging.
Inflation fell to 2.1%, down from 2.4% in the previous quarter. So, prices are still rising, just at a much slower rate than, say, 2022 when it was nudging 8.0%.
Likewise, trimmed mean inflation – which strips out volatile price changes and, as a result, is a valued metric by the RBA – is now at 2.7%, down from 2.9%.
Together with the Australian economy growing sluggishly, the RBA has responded to spending stimulus calls with today’s easing.
Interestingly, ANZ actually raised rates last week for new customers on its ANZ Plus variable home loan. Perhaps they thought nobody would notice?
Looking back this year, the RBA’s cuts have been intermittent – in February and May with pauses in April and July.
This cautious approach may be due to some banks and lenders historically holding back some percentage of rate drops when the RBA cuts in quick succession.
Or the RBA are simply being cautious.
‘Uncertainty in the world economy remains elevated,’ it added. ‘There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided,’ the update added.
‘Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity, and there remains a risk that households and firms delay expenditure pending still greater clarity on the outlook.’
If you’d like to review your current home loan arrangements, reach out to Mortgage Broker Sydney.
Our friendly brokers can meet you wherever is most convenient: your home, office, or a local cafe.
In addition, we are here to guide you on various strategies such as uncovering lower rates, enhancing savings, consolidating debts, and alleviating the impact of rising household prices.
Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!