You’ve no doubt heard by now that the Reserve Bank dropped the cash rate by 0.25% yesterday, the first cut in four years.
To the relief of all, the big four banks immediately announced they would pass on the rate cut, effective from the end of the month. And it wasn’t just the big four banks that got around the cut, with at least a dozen other lenders also joining the party.
What does the cut mean?
Based on a 30 year loan with principle and interest repayments, borrowers can expect savings along the following lines –
| Loan Size | Monthly Saving | Annual Saving |
| $750,000 | $121 | $1,452 |
| $500,000 | $81 | $972 |
| $250,000 | $40 | $480 |
Are more cuts likely?
It doesn’t seem so. RBA governor Michele Bullock said financial market expectations of a string of rate cuts over the next 15 months were “unrealistic”, effectively killing the idea of another cut at the end of next month.
That’s not to say there couldn’t be any further rate cuts, but it seems market forces would need to change for the RBA to contemplate any reductions in the near future.
As always, time will tell.
