The Reserve Bank of Australia (RBA) has just announced the December cash rate, acting in accordance with market expectations and holding at the current record low of 0.75%.
“If the upcoming data releases this month don’t show GDP growth and consumer spending recovery, the pressure will be on for another cash rate cut," said Canstar group executive of financial services, Steve Mickenbecker.
“Now is likely too soon to definitively assess the impact of tax and rate cuts, but there is evidence to suggest that interest rate cuts are not stimulating consumer spending.
“Christmas spending will be the test; if we don’t see healthy consumer spending this month, the push will be on for a February cut.”
Following the October cash rate cut, a major lender reported just 7% of its borrowers opted to reduce their repayments, implying a significant portion of household funds has been freed up to be spent elsewhere.
Canstar’s 2019 Consumer Pulse Report found Aussie mortgage holders are paying on average an interest rate of 3.88%.
“[This] is high in today’s standards. Switching from 3.88% to the lowest rate of 2.69% on $400,000 loan could see someone save $94,250 over the 30-year life of the loan or $260 a month in repayments,” said Mickenbecker.
“There are better rates available, and it seems new borrowers are getting a better rate at the expense of existing borrowers.”
There are currently 330 owner occupied home loans with an interest rate below 3% listed on Canstar.
“Those with a home loan have to move now to get a Christmas rate cut and should be looking for more than the Reserve Bank can gift them. Borrowers have to start lobbying their bank for a better deal and be prepared to move their loan to get it,” Mickenbecker concluded.