Are You Benefiting From The Full Interest Rate Cut?

The new financial year brought a new, record low interest rate when the Reserve Bank of Australia (RBA) reduced the rate on 2 July by 0.25 basis points to 1%.

What does this mean to you, the homeowner?

Well, it depends on which bank you are with. Not every bank has passed on the rate cut in full.

CommBank has said that it will lower its rates but not for everyone. It is only customers who have interest-only loans that will benefit from the full 0.25% reduction.

If you are an owner-occupier or an investor who is paying a principal and interest standard variable rate home loan, you will see a reduction of 0.19%. You will start to see the benefit of these rates cuts on 23 July 2019.

Angus Sullivan, CommBank group executive of retail banking services, explained that this decision was based on the need to ensure that the benefits of further interest rate reductions and the cost implications of such maintained an equilibrium.

NAB followed suit, announcing that they will be reducing their variable home loan interests by 0.19%. Mike Baird, their chief customer officer for consumer banking, explained that costs and competitive pressures were the driving force behind their decision not to pass on the full rate cut.

“The difference between what we charge and how much it costs us to fund a mortgage remains under pressure and while the circumstances of each RBA cash rate decision will vary and has some influence on the cost of borrowing money, it is not the only funding cost driver for NAB.” 

Westpac is lowering their rates by 0.20% and 0.30% for owner-occupiers and investors with interest-only repayments respectively and will make their changes from 16 July.

ANZ is the only one of the big banks that has said they are passing the rate cut on in full, following a backlash after their decision to only share 0.18 if RBA’s June cut.

They will be lowering their variable rates for both owner-occupiers and investor loans in full, starting 12 July, confirmed by ANZ retail executive Mark Hand.

Right now is a great time to be assessing your current loan structure.

We always talk about how we don’t place emphasis on finding loans simply for the lowest interest rates. But if you haven’t had a Financial Health Check or review recently, with all the changes that have been happening in the finance industry, now could be a great time to get in touch with one of our Finance Strategists, to see if you are getting the most out of your home loans.

A lower interest rate could be a nice little bonus, but nothing comes close to the benefit of structuring your home loans in the best possible way for achieving your goals!

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