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COVID-19 cash rate cut

The Reserve Bank of Australia (RBA) has cut the cash rate to a record low of 0.25% following an emergency meeting due to the impact the coronavirus is having on the economy.

RBA Governor Philip Lowe said that the rate cut was due to the virus causing “major disruptions to economic activity across the world”.

“This is likely to remain the case for some time yet as efforts continue to contain the virus,” said Governor Lowe.

Governor Lowe added the cash rate cut would help support jobs, incomes and businesses so that when the health crisis recedes, the country will be well placed to recover.

“The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3% target band,” said Governor Lowe.

 

Hasn’t the RBA already cut the cash rate this month?

Yes they have. And ordinarily, the RBA board only meets on the first Tuesday of every month. But as we’re all well aware, extraordinary times call for extraordinary measures and so an emergency RBA Board meeting was called.

The RBA last held its regular meeting on March 3 and cut rates to 0.5% because it believed the coronavirus outbreak was going to hit the economy hard.

However, over the past fortnight, global financial markets have been in freefall as countries all around world reel from the economic fallout of the COVID-19 pandemic.

 

Sure, it might mean I pay less on my loan. But should I be worried there’s been another cut?

There are lots of things happening very quickly right now and it’s completely normal to feel anxious about what may unfold over the coming weeks and months. Whilst we’re not down-playing the situation (we’re a small business, afterall) we choose to take comfort in the Philip Lowe’s comments towards the end of the RBA Media Release:

Australia’s financial system is resilient and well placed to deal with the effects of the coronavirus. The banking system is well capitalised and is in a strong liquidity position. Substantial financial buffers are available to be drawn down if required to support the economy. The Reserve Bank is working closely with the other financial regulators and the Australian Government to help ensure that Australia’s financial markets continue to operate effectively and that credit is available to households and businesses.

Today’s policy package from the Reserve Bank complements the welcome fiscal response from governments in Australia. Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery.

 

We also choose to focus on the things that we have some control over – i.e. finding ways to help you save on your home loans – because it’s what we do best.

Plus, with low rates and refinance rebates on offer, there are some good opportunities to save even more on your loans.

 

So, what does this rate cut mean for *your* home loan?

We’ll wait to see how lenders respond to this latest RBA cut.

Even though this is the second RBA cash rate cut this month – and the fifth since June 2019 – many of us may be looking for some extra financial breathing space due to implications of the coronavirus outbreak.

(Remember that if lenders do pass on a rate cut, it doesn’t automatically reduce your monthly repayments straight away.) 

Please get in touch if you want to chat about your home loan.

We’re here to help you work through your options – whether that be asking your lender to drop your monthly repayments, refinancing, asking for additional rate discounts, or possibly talking about hardship arrangements.

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