Last month, the RBA defied market expectations by keeping the cash rate unchanged. However, this month on 12 August, they announced a cash rate reduction in an attempt to ease cost-of-living pressures on Australian families.
The statement released by RBA Governor Michele Bullock announced a unanimous decision from the Board to reduce the cash rate by 25 basis points, down to 3.60%. Underlying inflation has continued to decline towards the midpoint of the RBA’s 2-3% target range, prompting this rate cut.
How much could you save on your mortgage repayments?
Unless you’re on a fixed-rate mortgage, your home loan rate is likely to reduce by 0.25 over the next few weeks. Many lenders have already confirmed they will pass on the full 0.25 rate cut, which is pleasing news.
The higher your loan balance, the more interest you will save from this rate reduction.
Whilst your interest costs will decrease, your repayment amount won’t necessarily change. Lenders don’t automatically reduce the variable home loan repayment amount in line with rate cuts, unless you specifically ask them to.
Most lenders will simply maintain your repayment amount at the old level. It’s just that with a rate drop, more of your money will go towards paying off the principal (rather than the interest) each month.
You can find out more on this here.
Still feeling under pressure with your mortgage? Want to make sure you’re not paying too much?
Even with the latest rate cut, many homeowners are finding it tough to cover repayments at interest rates that are much higher than when they first took out their home loan.
If you’re looking for ways to save on interest, we’re here to help.
Just reach out to our team today.
