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.
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