Forget one rate cut
Finally, another rate reprieve for mortgage holders – and it could be way better than you think, too.
Belatedly, on Tuesday, the Reserve Bank delivered a third interest rate cut. Not the 35 basis points that would have brought rates back to a nice neat multiple, but the regular 25 basis points despite the current irregular setting – so the official interest rate is now 3.6 per cent.
The official or cash rate is good to know (take note any politicians likely to face a grilling on TV or radio!).
But what matters to home loan holders is their new standard variable rate.
So it's great news that lenders have largely all announced that they are, mostly, fairly swiftly, passing on the cut in full.
What's the problem?
The standard variable rate – on average – is currently running at about 2.5 percentage points (or 250 basis points) above the cash rate.
Which gives you a good benchmark for your own new mortgage rate: the calculation is therefore 3.6 per cent (official rate) plus that usual 2.5 percentage point margin, to give 6.1 per cent.
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