RBA leaves cash rate on hold in April, but there’s still potentially money to be saved

RBA leaves cash rate on hold in April, but there’s still potentially money to be saved

7 May, 2020

The Reserve Bank of Australia (RBA) has made the decision to hold the cash rate at 0.25% as the “national bridge-building task” continues.

The news followed RBA Governor Phillip Lowe’s April 21 speech where he affirmed that the cash rate would not be increased until “sustainable progress” is made towards goals for full employment and inflation.

Now that monetary policy has reach its lowest bound – at least for the time being – the central bank is instead focusing on how it and the government can best support policy that will ensure the ongoing availability of credit.

Following March’s back-to-back rate cuts, we are now starting to see some of the lowest home loan interest rates ever.

Will interest rates go back up?

While interest rates will likely rise again at some point in the future, The RBA has indicated that it won’t be anytime soon.

In the previous minutes, the RBA detailed that it expected the cash rate “would remain at a very low level for several years”.

It is anticipated that no positive cash rate moves will be made until progress is made towards full employment and inflation reaches a sustainable 2 – 3%.

How much could you save?

Although the cash rate has remained at 0.25%, numbers are already circulating about how much customers could potentially stand to save on their home loan if they were to shop around.

Below is an example of the potential savings someone could make by switching to a product with a lower interest rate:

Loan SizeExample RateNew RateMonthly SavingsAnnual Savings
$400,0004.00%3.05%$204$2,448
$500,0004.00%3.05%$255$3,060
$800,0004.00%3.05%$408$4,896
$1 mil4.00%3.05%$510$6,120

Recent home loan interest rate movements

Since the start of March, the larger banks cut variable mortgage interest rates by approximately 0.29% on average, while the rest of the market cut rates by 0.24% on average.

Most of the recent interest rate movements have been to fixed products, such as the below reductions from the big four banks:

  • ANZ – Announced a fixed rate adjustment to 2.19%p.a. on their 2-year fixed rate for owner-occupiers making principal and interest repayments.
  • CommBank – Announced a 0.70% cut on 1, 2 and 3-year fixed rate loans (2.29%p.a. from 1 May).
  • NAB – Announced a cut of up to 0.60% on fixed-rate loans.
  • Westpac – Announced a fixed-rate adjustment to 2.29%p.a. on 1,2 and 3-year loan terms which are part of their Premier Advantage Package (owner-occupier customers)

Fixed interest rate home loans for both owner-occupiers and investors reduced by an average of 0.46%.

What are the smaller lenders doing?

Many smaller lenders have also gotten onboard with rate cuts, some passing on March’s full 0.25pts interest rate reduction.

Smaller lenders such as Bankwest, Firstmac and ING are all among the many who have cut rates.

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How do I take advantage of historically low interest rates?

Whether you’re looking to purchase a property or refinance an existing home loan, it’s worth speaking to an experienced mortgage expert.

Homeloanscomparison.com.au‘s cost and obligation-free service can help you find a competitive home loan from a panel of 25+ trusted lenders, which you may have otherwise not known about. If we have potential home loan options for you, you’ll be connected to one of our experienced mortgage brokers, who can negotiate with the lenders and save you time by assisting with the paperwork.

Here’s how you get started online:

Step 1. Select your state below.

Step 2. After answering a few questions, you’ll be given possible home loan options to start comparing straight away and see if you can potentially save on your mortgage.

Select your state and enquire now.

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