Official cash rate has dropped 1.25%
Consumer confidence will be spurred by the ‘perfect three’; political certainty post the federal election, APRA easing credit guidelines and now, the Reserve Bank of Australia’s (RBA) decision to cut interest rates to a historic low today, according to Australia’s largest 100% family and owned mortgage broker, Loan Market Group.
Sam White, the Group’s Executive Chairman said numerous factors combined to deliver the uplift in confidence, including; APRA easing credit guidelines, enabling people to borrow more and the clincher - Morrison Government’s surprise re-election.
“We really saw the lift in economic confidence first in the opening day of trading on the ASX after the election when $33bn was pumped into equities,” he said.
“On the property front, people who had let their pre-approved finance lapse over the last 12-18 months have now returned, intent to make the most of changes to lending and the market sidestepping an overhaul to negative gearing and Capital Gains Tax changes.
“And now, with the RBA cutting the official cash rate today to a historic low of 1.25% for variable mortgage holders, we anticipate the wave of renewed optimism will further build.
“That being said, banks have moved independently of the RBA in recent times. I encourage banks to come to the party and pass on this gift to customers.”
While there has been hesitation from the Big Four to pass on the full RBA rate cut in the past, Coalition Treasurer Josh Frydenberg this morning echoed the RBA’s sentiment warning bank chiefs that Australian’s will not tolerate a refusal to pass on any cut to the official interest rate today in full, stating; "I expect all banks to pass on the benefits of sustained reductions in funding costs.''
Since August 2016, the cash rate has hovered at 1.5 per cent, more-or-less translating to a standard variable rate among lenders of around 4-6 per cent, depending on the lender. Today’s cash rate decrease, with another 0.25 basis point decrease predicted before Christmas, has come as a saving grace for Aussies according to Mr White.
“The record low-interest rate creates real opportunity for first home buyers, investors and refinancers, with house prices in Australia’s two major cities now at the same level they were in late 2015 to early 2016.”
“This, coupled with the Coalition Government’s plan to help first home buyers save for a deposit, whereby FHB’s would only need a 5 per cent deposit, brings overdue relief to those wanting to enter the housing market”, he adds.
As the falling cash rate generally leads to cheaper repayments, existing borrowers have the potential to save big on their loan, with savings on the national average loan amount of $400,000, equating almost $60 a month, or just over $700 a year.
“Consumers that have been looking to re-negotiate for a more competitive rate, with additional loan features from their existing lender now have that opportunity to put them on notice”, said Mr White.
“Brokers have never been more important to everyday Aussies looking to enter the housing market, refinance or invest. Our brokers work with over 45 lenders and can help navigate the changing lending landscape.”