The Reserve Bank has unveiled its new measures along with the record low cash rate cut to 0.10%. It is a measure taken to support job creation and the recovery of the Australian economy.

Following its traditional Melbourne Cup Day meeting, bank governor Philip Lowe said the cash rate would be cut to 0.1 per cent. It has been at 0.25 per cent since the RBA meeting in March.

Who passed on the full rate cut among the big four?

There’s pressure for the big four banks to pass on any additional relief measures introduced by the RBA.

The big four have not made any rate cuts on their variable rate home loan rates. But they have announced rate cuts on fixed rate home loans, you can read more about it in Newsflash: Major banks drop fixed rates to 1.98% blog.

• ANZ: No rate cut
• CBA: No rate cut
• NAB: No rate cut
• Westpac: No rate cut

Which lenders passed on the full rate cut?

It is a waiting game to see which banks and lenders will pass on the rate cut. Lenders are competing with each other to take out the title of the lowest rate loan.

Most of the early changes have been in fixed rates, with a couple of the major lenders offering 4 year fixed rates below 2%.

View our page on interest rates for new competitive offers.

What does RBA cash rate drop mean for me?

You have to keep in mind that only variable-rate mortgages are affected by the cash rate.

If your mortgage is a fixed-rate, you’ll have to wait until the fixed-rate period ends before you can potentially take advantage of the new low rates.

Also, there is no guarantee, banks and specialist lenders will pass on the RBA’s cut as soon as it is announced or even at all.

What can I do if I have a variable mortgage?

You can follow these steps:

• Compare your interest rate on your home loan to other deals available. Is it still competitive?
• Enquire whether your lender plans to pass the new rate cut.
• If your lender doesn’t pass the rate cut, you can still ask for a better deal.
• If you want to look for a better deal, you can refinance to a lender that provides you with a competitive interest rate.
• For expert assistance, always seek the help of a mortgage broker.

Avoid paying the loyalty tax

‘Loyalty tax’ is the tax you pay for your loyalty to your banks. It happens when new customers get discounts while long-term clients pay a higher interest rate or fee, particularly for mortgage products.

If you have a mortgage with the same bank for more than three years, you’re likely paying too much.

Refinance or negotiate the new rates with your bank – you could save a few thousand because of it.

Is refinancing an option for you?

To be eligible to refinance you must meet certain criteria:

• Ideally, you should have less than 80% owing on your home loan.
• It would help if you had a clear understanding as to why you’re refinancing; be it to access a better interest rate or to reduce your monthly repayments, or to access some equity from your property.
• There are fees you need to consider when refinancing such as mortgage discharge fees, loan application fees, valuation fees, mortgage registration fees, ongoing lender fees etc.
• If you’ve been making loan repayments more than five years, and your property’s gone up in value, there’s a chance you might qualify.
• If you haven’t refinanced for a few years, you’ll be amazed at what lenders are willing to offer.

Can rates go any lower?

Everyone is curious to know whether they should fix now or wait for rates to drop further.

It’s not possible to predict whether it will drop more in the coming months.

However, RBA governor Philip Lowe speculates that “given the outlook, the board is not expecting to increase the cash rate for at least three years.” Given the cash rate is now at 0.10% there is not a lot of room for the RBA to lower rates any further.

Irrespective of further rate cuts or not, our specialist mortgage brokers know which banks have the most competitive variable interest rates on the market.

Call us on 1300 889 743 or fill in our free assessment form.