On Tuesday, the Reserve Bank of Australia decided to decrease the Cash rate by 0.25% to 1.00%
It was a surprise move according to many economists in the media, as there was a rate reduction in the previous month of June.
Before the decrease in June, there were no rate changes for 18 meetings; this was a record.
The last time this happened was in 1996 more than two decades ago when the RBA went for 17 meetings with no changes to the Cash rate.
What does an interest rate decrease mean for home loan owners?
If you are on a fixed rate, this does not affect your monthly repayment.
For homeowners or investors with variable home loan rates, your bank will decide on how much of the 0.25% reduction they will pass on.
Some banks have made announcements already, and some will have set dates to when they make a decision.
If you are unsure, contact your bank or broker.
With lower interest rates, your minimum monthly will decrease, there are a few strategies you have with lower home loan repayments.
- Put the extra funds back into your home loan
- Use the extra funds to repay loans with higher interest rates, e.g. Credit Cards, Personal Loans, Car Loan
- Treat yourself to something nice, e.g. Massage, Lunch or that little present that has not been on the budget.
While the last option sounds nice, it is probably not the most financially sensible thing to do