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Important Info About The Rate Cut

The Reserve Bank has taken the unprecedented step of holding an extraordinary meeting out of cycle to announce a cut to the cash rate, now sitting at 0.25%.

Along with what is being described as the “final” cut the bank will / can now make, they also announced they will begin buying government bonds in a process called quantitative easing to assist the economy as it heads into recession.

The announcement is the biggest in a generation, and here are the details you NEED TO KNOW:

What Happens To Rates Now?

RBA has confirmed rates WILL NOT rise until the economy rises to full employment.

In Feb, unemployment was 5.5%, full employment is 4.5% or lower. Australia is expected to push towards 10% unemployment and beyond by the end of the year.

That means rates won’t rise for years. The RBA governor acknowledged this, with the potential for the cash rate to remain at 0.25% for up to three years.

What Is Happening To My Rate?

Major banks ARE NOT passing on the cut to variable rate home loans.

The major lenders have announced they are cutting fixed rates not variable.

It is extremely important you review your options with an independent professional BEFORE choosing to fix your rate. Don’t get tempted by a low fixed rate by your bank, as it could be a very bad option for you.

Yes there will not be any further rate cuts for several years, however fixing your rate means you loose any redraw, offset or ability to repay your loan faster.

You lose all flexibility with your loan and are stuck at that lender for the term of the fixed rate period, you can’t switch banks without paying penalties.

You can’t sell your property without penalties, can’t change the loan, will find it difficult to use equity if you need it.

Locking you into a fixed rate benefits the lenders not you. It means they borrow cheaper, and lock their clients in, they make more from you while you can’t save by taking advantage of the lower rates.

What Should You Do?

With rates at a history defining all time low, NOW is the time to take advantage of those low rates and pay down your loans, as quickly as possible, when you can.

You can’t do that on a fixed rate.

It’s also the best time to borrow. If you’re not affected by the Covid-19 shut down, taking advantage of the low market and low rates means it may be the best ever time to make that decision to buy the home you’ve wanted.

What's Next?

Speak to your independent home loan specialist. If you don’t have one, get one.

We’re here 7 days to take any questions you may have, totally free and without obligation.


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