What is the cash rate and how could it impact me?
The cash rate can have a significant impact on home loan repayments. When interest rates are low, it can make it easier for people to buy a home or refinance their existing mortgage, as their repayments will be lower. However, when interest rates rise, home loan repayments can increase, which can be a burden for some homeowners.
What you need to know
The cash rate is the interest rate at which banks and lenders borrow or lend money to each other overnight. It is set by the Reserve Bank of Australia (RBA) and can impact the borrowing costs for households and businesses. Changes to these cash rates generally get passed on to consumers through the bank or lender’s own interest rates, both for loans and deposits such as savings accounts.
The RBA is a central bank made up of a group of members appointed by the Treasurer. Its objective is to implement monetary policy that fosters economic stability, employment, and prosperity for Australians, while also maintaining a robust financial system.
The RBA meets on the first Tuesday of every month to review the cash rate and adjusts it based on various economic factors, including inflation, economic growth, and employment levels. When the RBA lowers the cash rate, it is usually to encourage borrowing and spending, which can help stimulate the economy and create more employment opportunities. On the other hand, when the RBA raises the cash rate, it is to cool down the economy and reduces inflation.
How does the cash rate impact me?
The cash rate can have a significant impact on home loan repayments. When interest rates are low, it can make it easier for people to buy a home or refinance their existing mortgage, as their repayments will be lower. However, when interest rates rise, home loan repayments can increase, which can be a burden for some homeowners. For people wanting to buy a home, this can reduce their borrowing capacity making it more difficult to buy a home for the price you want. Rates can also impact those wanting to refinance their home loan to a different lender as their borrowing capacity may not be as strong as when they first settled their current loan.
What can I do?
Reach out to an experienced broker so they can help you to understand the options that suit your particular circumstances. Ask your broker if there could be a better suited loan for you that could save you money.
If you’re looking to buy a home ask your broker to calculate your borrowing capacity to help determine your price range and repayments.
Disclaimer
The information provided on this site provides an overview or summary only and it should not be considered a comprehensive statement on any matter. You should before acting in reliance upon this information seek independent professional lending or taxation advice as appropriate specific to your objectives, financial circumstances or needs. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only.
Licensing statement: Rayne Finance ABN [70 605 100 838] is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192. Disclaimer: (1) As with any financial scenario there are risks involved. This information provides an overview or summary only and it should not be considered a comprehensive analysis. You should, before acting in reliance upon this information, seek independent professional lending or taxation advice as appropriate and specific to your objectives, financial circumstances or needs. This publication is provided on the terms and understanding that: (2) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication. (3) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to the maximum extent permitted by the law to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication.
Explore other FAQs and Facts
Australian properties see record profits in 2024
The 2023-24 financial year marked a milestone for Australian property sellers, with 96% of houses sold nationwide yielding a median profit of $326,000. This trend reflects the long-term value growth of homes, with capital cities and regional areas both benefiting from a robust market and rising property prices.
The pros and cons of rentvesting
With housing prices up 37.8% since 2020, many Australians face tough choices between renting in desirable suburbs or buying further from city centres. Rentvesting offers a middle ground—renting where you want to live while investing in an affordable property. This approach can build wealth but requires careful financial planning.
5 reasons why this might be a great time to buy
With Australia’s property market cooling, some may see now as an opportune time to buy. While timing the market is tricky, reduced competition, rising rental prices, and potential long-term gains could make this a strategic moment for both first-home buyers and investors to consider entering the market.
How to consolidate tax debt
Struggling with ATO tax debt? If you miss payments, the ATO may charge 11.36% interest on unpaid amounts. One option is to consolidate your tax debt into your home loan, potentially saving on interest, though refinancing costs apply. Speak with a mortgage broker to explore this option and avoid further penalties.
How is interest calculated on my home loan?
Mortgage interest is calculated daily based on the remaining principal, but the reduction of the principal isn’t linear. In the early years, a larger portion of each payment goes toward interest. However, by making additional repayments or using an offset account, you can reduce the principal faster and pay less interest over the life of the loan.
How do green home loans work?
As Australians seek to minimise their carbon footprint, green loans are becoming popular. These loans finance energy-efficient homes, renovations, and eco-friendly products like solar panels, EVs, and insulation. With potentially lower rates and flexible terms, green loans also boost property value, as sustainable homes attract more views and sell faster.
Dream Home Dilemma: Should You Build or Buy your home?
Deciding whether to build a new home or buy an established one is a major step in your homeownership journey. Each choice has its own set of pros and cons, from the opportunity to customise your space to the convenience of moving into an existing home. Understanding these differences can help you make the best decision for your future.
9 things to prepare before buying a home
To ensure a smooth property purchase, start by boosting savings and avoiding job changes three months before applying for pre-approval. Check your credit report for errors, consult a mortgage broker, and choose a conveyancer. Research locations, attend open homes, and arrange inspections. Contact me for expert guidance and loan pre-approval.
Your quick guide to guarantor home loans
Saving for a deposit can be challenging, but a guarantor home loan offers a solution. By having a guarantor, typically a parent or relative, cover part or all of the deposit, buyers could enter the property market sooner. With this support, you might qualify for a home loan with just 5% or even 0% savings.
Government opens up more housing assistance places
The federal government has expanded the Home Guarantee Scheme, offering an additional 50,000 places for 2024-2025. This includes 35,000 spots for first home buyers, 10,000 for regional buyers, and 5,000 for single parents. Eligible applicants can secure a home with a low deposit and avoid lender’s mortgage insurance.