Latest news with #RBAgovernor
SBS Australia
2 days ago
- Business
- SBS Australia
What the RBA's interest rate decision means for your mortgage
The Reserve Bank's interest rate cut will be felt as good news for millions of mortgage holders across the country. The RBA announced a reduction in the cash rate by 0.25 percentage points from 3.85 per cent to 3.6 per cent. It marks the third rate cut this year, following similar reductions in February and May. RBA governor Michele Bullock acknowledged the cut comes as "households are still feeling the pain of higher costs". "The board will keep doing what it needs to do to keep inflation down and maintain a healthy jobs market because when inflation is low and stable and people can get jobs; it's good for households, it's good for the community, and it's good for the broader Australian economy." So how much will mortgage holders save? Household savings on the way According to financial comparison website Canstar, mortgage holders with a $500,000 loan can expect to save around $74 per month. This estimate is based on an owner-occupier paying principal and interest with 25 years remaining on the mortgage. Those with higher mortgages, up to $1 million, can expect to save around $148 per month. Including the two previous rate cuts in February and May, the accumulated savings are even higher. Those with a $500,000 loan could potentially save $226 per month, while those with a $1 million loan could save up to $453 per month. Source: SBS News Will the banks pass the savings on? A number of banks have promised to pass the rate cut in full to customers. For Westpac customers, a -0.25 per cent rate adjustment will be passed on for variable interest rate home loans from 26 August. The Commonwealth Bank says its cuts will come into effect on 22 August. Macquarie Bank announced its variable rates will be reduced as of 15 August. ANZ and NAB have followed suit. Around 20 lenders also cut their variable rate ahead of the RBA's announcement. A number of major banks have promised to pass on the rate cut in full to customers. Source: AAP / Rick Rycroft Diana Mousina, deputy chief economist at AMP, urges caution as not all mortgage holders will be eligible for an automatic reduction. "There's not this automatic reduction to mortgage rates just because of what the RBA does. It may take a few months for it to actually get passed through to mortgage repayments." Paying more now to save later Canstar data insights director Sally Tindall suggests that some mortgage holders may benefit from keeping their repayments the same. "For those managing to hold their budgets together, consider keeping your repayments exactly the same," Tindall said. "Every rate cut is another opportunity to invest back into your mortgage and potentially be debt-free months, if not years early." If a mortgage holder who was sitting on a $600,000 loan in February kept their repayments steady, they would be paying $272 more per month in repayments than if they had lowered them to the minimum rate. But it would also mean shaving off three years and three months from the length of their mortgage. Ultimately, Tindall urges mortgage holders to weigh up what is best for them. A good time to talk to the bank "Ultimately, any sort of rate cut can still be seen as relief, but given that rates were hiked so much it's just taking some of that increased pressure away. Mortgage holders are still paying more than they were a few years ago." Mousina says that it's important to figure out if your current mortgage is appropriate for you. "You want to make sure your variable rate is the lowest you can have." Tindall says that after this rate cut, ambitious owner-occupiers should be able to set themselves a stretch target of 5.25 per cent. "Your mortgage rate is one number where you want to be aiming for well below average."
Yahoo
24-07-2025
- Business
- Yahoo
RBA boss gives major rates clue
A tight labour market blocked a rate cut in July, but the RBA boss says Australians won't have to choose between a job and rate relief. In her speech at the Anika Foundation Fundraising lunch on Thursday, RBA governor Michele Bullock revealed what the central bank will be looking for when it meets in August to discuss the cash rate. She said the board was not looking for outright mass job losses, but a gradual easing in labour market conditions that has so far been most evident in fewer job vacancies, reductions in hours worked and declining rates of voluntary job switching. 'These shifts aren't without their challenges, but they all tend to be less disruptive than outright job losses,' she said. Pointing to last week's ABS labour market data, she said the spike in job losses, from 4.1 to 4.3 per cent, was not the silver bullet for future rate cuts that experts forecast. 'Some of the coverage of the latest data suggested this was a shock – but the outcome for the June quarter was in line with the forecast we released in May,' she said. She explained looking only at labour market movements, there were more outright job losses than the RBA had forecast, but other measures such as the vacancy rates were in line with previous central bank predictions. 'More broadly, leading indicators are not pointing to further significant increases in the unemployment rate in the near term,' she said. Ms Bullock said while the board's remit was to balance employment with price stability, the central bank wasn't necessarily looking for job losses. 'I should note the RBA can't wave a magic wand and control how adjustments in the labour market play out. Interest rates are too blunt an instrument for that.' 'Losing a job can be one of the most stressful events in someone's life, and it can have far-reaching implications for families and communities,' she said. Ms Bullock's speech reinforces the message from the minutes of the RBA's monetary policy board meeting, released on Wednesday, where the central bank revealed a tight labour market was the key blocker of further rate cuts. 'Recent monthly CPI indicator data – which can be volatile and does not cover all items in the CPI – were broadly consistent with this expectation,' the RBA board said. But with more Australians currently in work, the RBA was wary the strong employment figures could lead to an increase in inflation. 'The labour market was assessed to have remained tight, with measures of labour utilisation little changed over the prior year,' it said. 'Growth in private demand had begun to recover, but was still subdued.' A cautious RBA monetary board held the official cash rate at 3.85 per cent following its July meeting, with the shock move defying expert commentators and predictions from the money markets. The board voted 6-3 in favour of the hold. 'A minority of members judged that there was a case to lower the cash rate target at this meeting,' the board said. 'These members placed more weight on downside risks to the economic outlook – stemming from a likely slowing in growth abroad and from the subdued pace of GDP growth in Australia.' The RBA monetary policy board will next meet on August 12, with money markets widely forecasting a rate cut.
