Good news for mortgage borrowers

It’s been a long time coming. But finally, after months of speculation, the Reserve Bank of Australia (RBA) has made the decision to decrease the cash rate by 0.25 of a percentage point, to 4.1%. It’s the first movement at all on the cash rate in more than a year, and it’s good news for mortgage borrowers.

As many mortgage borrowers remember only too well, the RBA has hiked interest rates on 13 occasions between May 2022 and November 2023, before leaving the cash rate on hold at 4.35%…until now that is. (In fact, for tens of thousands of mortgage borrowers in Australia it’ll be the first time they’ve ever experienced a rate cut). Let’s just hope the banks make the adjustment on interest rates sooner rather than later. For example, on a home loan of $500,000, over a 30-year term, at an interest rate of 4.5%pa, a fall by 0.25% will mean your repayments reduce by $74 a month.

But will it be a one-off cut, as some experts are suggesting? Is the RBA just letting off some steam like the valve on a pressure cooker? Or will it be the start of a series of rate cuts over the coming months? The RBA Governor, Michelle Bullock, remained cautious. She said she couldn’t confirm if it was ‘one and done’ when it came to rate cuts. “What I would say is that the market is expecting quite a few more interest rate cuts — to the middle of next year, about three more on top of this,” she said. “Whether or not that eventuates will tend very much on the data. Our feeling at the moment is that’s far too confident,” she added.

Thankfully, in this part of the world, the average sized mortgage is substantially less than places like Sydney or Melbourne. Still, any reduction in interest rates is a good thing.