Interest rates on the move as RBA cuts rates again

On 2nd July 2019 the Reserve Bank Board announced it has cut the official interest rate again by another 25 basis points.

We are now down to a new all-time low of 1 per cent, as the RBA desperately tries to boost the sluggish economy.

The Reserve Bank’s decision was largely expected as GPD figures released last month provided little confidence. The Australian economy continues to be weighed down with little progress made into the spare capacity in the labour market.

The RBA is hoping to provide a much needed boost to the Australian economy as the June rate cut did little to curb their desired targets of lowering employment, increasing overall wages growth and improving inflation.

The winners

ANZ and Westpac were heavily criticised as they only passed on part of last round's rate cut in June to their standard loans. The RBA will be applying pressure to the big four banks this time around to pass on this latest rate cut, which is potentially good news for both homeowners and property investors.

If banks decide to pass on the consecutive interest rate drops we could see mortgage holders paying down their debts faster, potentially saving thousands extra in loan interest each year simply by maintaining their current payment arrangements. However, reality may be very different for customers if lenders decide not to pass on the back of the July rate cut; watch this space.

Property investors may also be set to profit as the latest round of rate cuts could provide some much needed stability and levelling off in the broader housing market.

The losers

Today’s decision could be a step in the right direction, but not all are set to benefit from the recent news. Australians with savings in the bank, such as self-funded retirees, will feel the pinch as term deposit and savings accounts rates are expected to contract further.

More cuts to come?

While it’s the first time the RBA has cut rates in two consecutive months in almost a decade, many economists believe further rate cuts are expected, and rates could fall as far as 0.50 per cent before it “bottoms out”.

With so much uncertainty out there, it’s now more important than ever to ensure you are on top of things. Talk to your Findex adviser to review your strategies and ensure you remain on the right path.