Will lenders pass on the RBA rate cut to you?
The RBA has cut the official cash rate to a new record low of 1.25%. But hang on a sec… Will lenders even pass on the cut in full? Today we’ll look at how you can make the RBA rate cut work for you.
The Reserve Bank has cut interest rates to 1.25% – down from 1.5% – which is the first rate cut in almost three years (since August 2016).
“The Board took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target,” said RBA Governor Philip Lowe in a statement.
But will the banks pass the cuts on?
Well, that’s to be determined by the banks.
Historically they have always passed along some portion of a rate cut, if not all.
This is the first rate cut since the banks were dragged over hot coals during the royal commission and came out faring not so well. Therefore they would be pretty foolish to withhold a rate cut and risk more public backlash. Instead, this is a great opportunity for the banks to regain consumer confidence by passing on the rate cut.
The government has also urged them to pass on the cuts in full to customers.
Treasurer Josh Frydenberg met with Commonwealth Bank chief executive Matt Comyn the day before the cut was announced after similar meetings with other major bank CEOs.
“I expect all banks to pass on the benefits of sustained reductions in funding costs,” said Mr Frydenberg.
Well, on the back of the RBA decision, you may see a number of lenders advertising interest rate cuts.
What can be hard to determine is if they’re offering to pass on the full cut, a partial cut, or simply re-advertising a rate they’ve been offering for months.
So what to do?
Well, the good news is that we’re following the market closely. We’ll know which lenders are passing the rate cut on to their customers in full, and which lenders aren’t.
So if you see or hear about a rate cut from a lender that you want to know more about, your best bet is to get in touch with us and we can give you a good idea of how it compares to other lenders in the market and/or whether there are other options that are more suited to your situation.
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