Sarah: The Reserve Bank of Australia, or the RBA, cash rate movements have been in the
news a lot lately, and if you're applying for a home loan or already have one, this
is great news.
But you might be wondering what is this, how does it work, and how might you benefit from
it?
Watch this video as we go through six key questions on how the RBA cash rates work and
how you can take advantage of it to save money on your home loan.
Sarah: Hi guys, it's Sarah.
Here at Lendi, we've helped thousands of Australians get in to their dream home or refinance their
home loans faster.
Now before we start, if you're interested in getting great home loan tips in Australia,
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Sarah: Number one, what is the RBA cash rate update?
The RBA is Australia central bank and bank note issuing authority.
The RBA dictates the cash rate, which influences the interest rates to ensure that Australia's
economic growth is controlled so that hyperinflation does not occur.
The RBA sets the cash rate on the first Tuesday of every month, except for January.
They decide whether to raise it, lower it or leave it the same depending on a number
of factors, including the performance of the Australian dollar, the state of the housing
market and inflation.
The recent 2019 cuts were primarily motivated by stagnant wage growth, and the recent downturn
in property values in a bid to help boost inflation.
Sarah: Number two, what does an RBA cash rate change mean for your home loan?
If you already have a home loan, a cash rate drop can have a significant impact on your
wallet.
Within days of the cash rate cuts, dozens of banks or lenders passed on these decreases
either partially or in full, resulting in lower home loan repayments for customers.
Each 25 basis point reduction, if applied in full, could save the Australian mortgage
holder with a $380,000 loan and incremental $600 per year in interest.
It pays to keep an eye on your lender's interest rates because even the slightest increase
in their rate could make a significant impact on your monthly repayments.
Sarah: Number three.
Will you be impacted if you have a variable or a fixed rate loan?
Whether you're impacted on the cash rate changes, it will depend on your loan type.
If you're on a variable rate home loan, you will almost certainly be impacted by the cash
rate changes.
This can be beneficial if the rate decreases.
However, it can be problematic if the rate rises.
If you have a fixed rate home loan, your interest rate will not change.
If you have a split rate home loan where part is fixed and part is on variable, only the
variable portion will be impacted by the rate changes.
Sarah: Number four, what if your bank doesn't pass on the rate cuts?
There really is no point paying more interest than what you need to.
If your lender has not passed on the rate cut, you could try asking for a better deal.
And if you can't get one, then it might be worth researching your options online.
There could be savings to be made that could help put you in a financially stronger position.
Sarah: Number five, what if the cash rate goes up?
When the cash rate increases, your repayments are likely to go up, although this is subject
to your lender adjusting these rates in line with the changes.
This can lead to less disposable income, which means that you may be forced to reconsider
your spending habits.
Sarah: And number six, how can you take advantage of the rate cut?
A cash rate cut can be a great opportunity for you to refinance your home loan.
If your lender did not pass on the full rate cut, it's worth seeing if you can get a better
deal.
Most Australians imagine refinancing is a complicated process, when in fact it can
be quite easy and pain-free.
Sarah: If you want to learn more about the refinance process, you can check out our video
here.
To compare home loan options, you can jump on comparison sites to check the latest interest
rates, and then separately go to those lenders to apply for a home loan to see if you could
get approved.
This can be really time consuming.
The easiest way is to use an online home loan platform, like Lendi, where you can complete
the whole process online.
From comparison to application, you'll also have a home loan specialist that will help
support you through the journey at no extra cost to you.
Sarah: That's it, guys.
All you need to know about the RBA cash rate and how you can benefit from rate cuts.
If you're looking for more tips, you can join our Facebook group, Home Loan Hacks Australia,
where we answer anything home loans.
Finally, if you found this video helpful, please give us a thumbs up, and if you have
any comments, leave them in the comment section below.
If you want more information on other relevant home loan topics, you can check out our video here
Thanks, guys.