It’s been a busy week, with the RBA’s Monetary Policy Decision released on February 18, seeing the Cash Rate finally reduce by 25 basis points to 4.10%.
The RBA hasn’t lowered the Cash Rate since November 2020, and the last time it sat at 4.10% was October 2023!
It’s an absolute understatement to say it’s been a hard few years for most home loan customers and those trying to enter the market.
What are the RBA saying about inflation and the future?
The RBA explained Tuesday’s rate cut by pointing out that inflation has dropped “substantially” from its 2022 peak, and they’re feeling confident that price pressures are heading steadily toward the 2-3% target range.
“Inflation has come down a lot since its peak in 2022, thanks to higher interest rates helping to balance supply and demand,” the Board said in its 2:30 pm statement.
“In the December quarter, underlying inflation was at 3.2%, which shows that inflation is easing a bit faster than expected. On top of that, private demand has stayed pretty weak, and wage pressures have eased. All of this gives the Board more confidence that inflation is on track to settle within the 2-3% target range.”
The Board also warned that there are still some risks to watch out for. “Some recent job market data came in stronger than expected, which means the job market might be tighter than we thought,” the statement said.
“The forecast for underlying inflation, based on market predictions for interest rates, has been adjusted slightly higher for 2026.
“So, while today’s rate cut is a step in the right direction, the Board is staying cautious about making any further moves just yet.”
How are lenders reacting to the Cash Rate cut?
As of the 20th of February, most of our lending panel have announced that they will implement the full 25 basis point reduction for their existing home loan customers on variable rate products.
We will also see most new home loan variable rates reduce by 25 basis points. The date this will be actioned will vary with each lending institution, but you should see most reductions in place by February 28 or March 7.
Not all lenders will automatically adjust your home loan minimum repayments. Instead the interest payable might be the only adjustment, with your repayment pushing more funds into redraw. Ultimately you will be saving on interest and it’s a start to a brighter year for lending. It’s time to review your position and see where we can help you in a quickly changing market.
