Interest rates have been slashed to a record low of 0.5%.
On Tuesday, March 3, the Reserve Bank of Australia (RBA) cut the official cash rate from 0.75% to 0.5%, to try and contain the economic fallout from the coronavirus outbreak.
The RBA has now cut interest rates four times within the past year.
As a result of the cut, borrowers may be able to secure a lower interest rate on their home, investment property and small business loans.
Prior to the RBA announcement, Prime Minister Scott Morrison urged Australia’s major banks to pass on any cut in full to support the economy.
“There is no doubt that if the bank were to take a decision today on cash rates that the Government would absolutely expect the four big banks to come to the table and to do their bit in supporting Australians as we go through the impact of the coronavirus,” he said.
Following the RBA decision, Westpac, Commonwealth Bank, National Australia Bank, ANZ and several smaller banks announced they would cut rates across some loan products.
Eligible borrowers could potentially save thousands on their loan repayments as a result of the rate cuts.
Some lenders are offering interest rates as low as 2.49% on owner-occupied, principal and interest home loans (comparison rate 3.89%).
It’s important to remember that eligibility criteria apply to mortgage and business loan products. So, even if a lender is advertising a low interest rate, that rate won’t be available to you, unless you meet the lender’s eligibility criteria.
Also, some smaller banks have passed on the full rate cut, however in some cases only to new borrowers.
When selecting a loan product, be sure to consider any fees that apply, and whether the loan includes all the features you need.
It’s wise to meet with a mortgage broker. A mortgage broker will research which loan products will suit your needs and save you money. They’ll also check whether you meet the lender’s eligibility criteria.
The property market is already running strongly in some states having bounced back from the falls experienced from late 2018 and through 2019. Property prices have continued to rise into 2020.
However, there are concerns that fears around the coronavirus (COVID-19) could rattle market confidence, including the property market.
So will the RBA’s decision help mitigate this and trigger a surge in home loan demand?
Brett Mansfield, Buyers Choice CEO commented: “I expect the rate cut will have less impact than past reductions as people are concerned with the unknown impact of the coronavirus outbreak and are likely to use the savings to reduce existing debt until they regain confidence. This, however, is unlikely to stop the momentum which currently exists in the property markets and the rate cut will add further fuel to this activity.”
“This cut to the official cash rate follows CoreLogic reporting a 1.8 per cent increase to Sydney’s median house price to $1,001,357, while apartments rose 1.5 per cent to $763,962. At its current trajectory, house values now remain 3.7 per cent below the June 2017 peak, a figure the city could eclipse by the end of May and will return the market back to a high level of unaffordability.”
If you’re looking to buy a property or refinance your existing mortgage, now is a great time to research your options. Interest rates are at a record low, and although nationally property prices are rising, they still haven’t reached their June 2017 peak. If you’d like to explore how you can take advantage of the recent rate cut, please contact us, to organise a chat with one of our experienced mortgage brokers.
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