The cash rate cut announced by the Reserve Bank of Australia (RBA) in March, capped off an action-packed year for the cash rate, making it the fifth rate cut since May 2019.
But what’s in store for the cash rate over the coming months/ years? And what does this mean for you and your home loan?
What the experts say
According to AMP Capital chief economist Shane Oliver, “the next few years are likely to be pretty boring” with regard to cash rate movements.
Property researchers agree, with CoreLogic predicting the cash rate will stay at 0.25% until 2023.
“The RBA has previously been clear that the cash rate won’t move higher until inflation is well within the 2-3% target range and labour market indicators are trending towards full employment, implying an unemployment rate around the 4.5% mark,” says CoreLogic.
The RBA recently indicated that unemployment is likely to peak around 10% in June and inflation may turn negative over the coming months, meaning it’s extremely unlikely that neither inflation or unemployment indicators would trigger a cash rate increase – at least for the next few years.
Westpac Chief Economist Bill Evans also agrees, commenting “We expect that the overnight cash rate is unlikely to be lifted before December 2023.”
So, how does this affect you and your home loan?
In simple terms, the competition between lenders is heating up to secure your business – with low variable rates and even lower fixed rates.
This low cost of debt is a key factor that should help to support housing demand, as the economy starts to rebuild from COVID-19.
Despite the fact that some lenders are having trouble maintaining their service levels at the moment, lenders are still keen to lend.
Low interest rates (and refinance rebates) create a good opportunity for you as a borrower – should you wish you take it.
Will *you* take advantage of the current climate?
With the above in mind, the real question for you to consider is: “What are you going to do about it?”
Will you explore your refinance options and start saving some interest?
Will you commit to making additional repayments, to really get ahead on your home loan?
Will you switch some of your loan to a fixed rate? (That way, you can save interest on the fixed portion and use those savings to pay more off your variable portion loan.)
– Or will you do nothing? –
We keep hearing that we’re in the middle of a once-in-a-lifetime event, and there’re no doubt that COVID-19 has changed the way the world operates.
Interest rates have never been as low as they are right now and our team has never been in a better position to assist you.
If you’ve been a bit complacent with your loans recently – i.e. not reviewing them regularly, allowing things to just continue as they always have – let us help you get proactive about managing your mortgage.
2020 might not have started out so great, but why not do what you can to ensure it ends a little better than it started.
Let’s make 2020 the year you actively took steps to improve your financial strength. Owning more of your home is a great way to help you accomplish that.
If you’d like to see what interest savings are available to you, provide your details here and we’ll be in touch shortly.
