RateCity.com.au
  1. Home
  2. Home Loans
  3. Articles
  4. What will another rate cut mean for you?

What will another rate cut mean for you?

Laine Gordon avatar
Laine Gordon
- 3 min read
article cover image

The Prime Minister last week joined the chorus of voices calling on the Reserve Bank of Australia to drop interest rates further, but it may not have been necessary – the general consensus by economists and financial markets is that we are heading for a cut in the 4.25 percent cash rate when the RBA meets tomorrow (February 7), even without politicians joining the fray.

A drop this month to 4 percent would be the third consecutive cut to the cash rate by the RBA, following cuts in November and December (the RBA does not meet in January).

“Our view is that the RBA will be cutting rates in February and March as well. Even though there are tentative signs of [economic] improvement, there is still a significant downside risk to the global outlook,” said Janu Chan, an economist with St George.

The RBA will make its decision based on two main factors: inflation and the prospect for global economic growth – or lack of – particularly in Europe, where gloom and doom continues to spread. Inflation data released by the Australian Bureau of Statistics on January 25 revealed that underlying inflation rose slightly to 2.6 percent, which was within the RBA’s 2-3 percent target but higher than expected.

On the release of the inflation figures, Treasurer Wayne Swan said: “With underlying inflation sitting squarely in the RBA’s target band, it does create room for further interest rate cuts into the future.”

Also last month, the International Monetary Fund (IMF) downgraded Australia’s growth forecast from 3.3 percent to 3 percent as a result of the ongoing European debt crisis.

St George’s Chan said weakness in the job market and housing market was also likely to influence the RBA’s decision to cut the cash rate. “Even though there are some signs of stability, such as a pick-up in housing finance, some other indicators, such as building approvals, have been weak,” Chan said.

“Consumer sentiment has also been quite low due to the economic outlook in Europe and concerns about job stability as well. The cuts in November and December have negated this somewhat, but there is still room for further cuts.”

Damian Smith, chief executive of RateCity expects there to be a big difference between what each lender will choose to pass onto borrowers – should there be a rate cut tomorrow.

“Smaller lenders are generally more competitive than the big banks, so they are likely to be more generous and will probably pass on more, if not the entire rate cut than the major shareholders of mortgages,” he said.

For instance, if you have a typical $300,000 home loan at 6.62 percent (the average basic variable rate of the major four banks) and you are given a 0.10 percentage point rate cut, your monthly repayments would be reduced by $20. If you were given a 0.25 percentage point rate reduction, your repayments would drop by $49 per month.

Disclaimer

This article is over two years old, last updated on February 5, 2012. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.

Compare home loans in Australia

5.99%

6.48%

$3,448

More detailsclick for more details

Australian Credit Licence 395219

Fees & charges apply

  • Promoted
  • Owner Occupied
  • Variable
  • 10% min deposit
  • P&I

6.39%

6.40%

$3,342

Enquire

Australian Credit Licence 233714

Fees & charges apply

  • Promoted
  • Cashback
  • Owner Occupied
  • Variable
  • 20% min deposit
  • P&I

5.69%

6.13%

$3,127

More detailsclick for more details

Australian Credit Licence 395219

Fees & charges apply

  • Promoted
  • Owner Occupied
  • Fixed 3 years
  • 10% min deposit
  • P&I

6.29%

6.20%

$3,311

More detailsclick for more details

Australian Credit Licence 234945

Fees & charges apply

  • Promoted
  • Special
  • Investor
  • Variable
  • 20% min deposit
  • P&I

6.84%

7.16%

$3,611

Enquire

Australian Credit Licence 233714

Fees & charges apply

  • Promoted
  • Owner Occupied
  • Variable
  • 5% min deposit
  • P&I

6.95%

7.15%

$2,896

Enquire

Australian Credit Licence 234945

Fees & charges apply

  • Promoted
  • Investor
  • Variable
  • 20% min deposit
  • Interest Only

7.20%

6.90%

$3,000

Enquire

Australian Credit Licence 234945

Fees & charges apply

  • Promoted
  • Investor
  • Variable
  • 40% min deposit
  • Interest Only

Product database updated 27 Jan, 2025

Promoted home loans

Unloan (a division of CBA)

Variable Rate Home Loan LVR < 80%

Real Time Rating™

  • 2024 Award Winner
  • Special
  • Owner Occupied
  • Variable

Interest rate p.a.

5.99%

Comparison rate* p.a.

5.90%

More detailsclick for more details

Australian Credit Licence 234945
Fees & charges apply

ubank

Neat Home Loan

Real Time Rating™

  • Special
  • Owner Occupied
  • Variable
  • 40% min deposit

Interest rate p.a.

6.09%

Comparison rate* p.a.

6.11%

More detailsclick for more details

Australian Credit Licence 230686
Fees & charges apply

ANZ Plus

Variable Home Loan

Real Time Rating™

  • Cashback
  • Owner Occupied
  • Variable
  • 20% min deposit

Interest rate p.a.

6.09%

Comparison rate* p.a.

6.10%

More detailsclick for more details

Australian Credit Licence 234527
Fees & charges apply

loans.com.au Pty Ltd

Variable Home Loan

Real Time Rating™

  • Owner Occupied
  • Variable
  • 10% min deposit
  • P&I

Interest rate p.a.

6.04%

Comparison rate* p.a.

6.08%

More detailsclick for more details

Australian Credit Licence 395219
Fees & charges apply

product data updated on

Product data updated on 27 Jan 2025