Are you upset banks aren’t passing the full rate cuts? Then read this…

Why does the RBA cash rate affect your home loan interest rate?

The cash rate that the RBA meets and sets each month is essentially a lever that dictates the interest rates banks need to pay to borrow money on overnight markets. The overnight market rate in turn impacts the costs banks incur to continue holding the variable rate loans they’ve issued.

So when the cash rate goes up or down, banks will all react differently.

Here’s what you need to know

• RBA cash rate movements impact the existing variable rate for a homeowner but not their fixed rates.
• Just because a lender passes on the full savings for one RBA rate cut, doesn’t mean they will the next time.
• Some lenders pass on the rate cuts right away, some wait a few weeks.
• Banks can and often move their interest rates without the cash rate being adjusted.
• Choosing a lender or a home loan has to be about your long-term strategy and how that bank reacts to the RBA rate adjustment is just a small factor in choosing a loan.

As a broker, here’s two ways I can help right away;

1. Provide you with a full breakdown of how all banks and lenders have reacted to the 2019 RBA rate cuts.
2. Analyse your current loan and interest rate and see if a more competitive deal might now exist.