Australia’s major banks are set to implement a long-awaited interest rate cut, offering mortgage holders a chance to ease financial strain. Following the Reserve Bank of Australia’s (RBA) decision to lower the official cash rate to 4.10%, millions of homeowners are expected to save on repayments.
However, delays and conditions attached to the reductions mean that not all borrowers will see immediate relief. This article appeared on news.com.au, reporting on the impact of the rate cut and the response from major lenders.
Rba Cuts Rates for the First Time Since November 2023
The Reserve Bank of Australia announced on 18 February that it would cut the official cash rate to 4.10%, the first reduction since November 2023. The decision follows a slight easing in the quarterly trimmed mean inflation rate, which fell to 2.8% in January, down from 2.7% in December.
This cut marks a shift in the RBA’s monetary policy, which had remained unchanged for several months as the central bank attempted to control inflation. The reduction is expected to alleviate financial strain for homeowners with variable-rate mortgages, offering potential monthly savings on repayments.
Major Banks Announce Rate Cuts, but Delays Remain
Following the RBA’s decision, Australia’s four largest banks—Commonwealth Bank (CBA), ANZ, NAB, and Westpac—announced they would pass on the 25-basis-point reduction to mortgage holders.
- CBA, ANZ, and NAB customers will see the changes take effect from Friday.
- Westpac will adjust its rates later, with the new rate structure taking effect on Tuesday, 4 March.
Despite this, the process of implementing the rate cut is not automatic for all customers. CBA, NAB, and ANZ borrowers must contact their bank to request an adjustment in their direct debit repayments. Those who do not take action will still pay the same amount, meaning they will pay off their mortgages faster rather than benefiting from immediate lower payments.
Westpac is the only major bank that will automatically adjust payments for customers on minimum repayments, but these changes will not be reflected until late March or early April.
How Much Will Mortgage Holders Save?
The reduction in the cash rate is expected to save homeowners around $100 per month, depending on loan size and interest rate. However, rates remain significantly higher than their historic low of 0.10% in 2020, meaning many Australians are still paying much more than they were a few years ago.
According to data from Canstar, the new variable interest rates for the major banks will be:
- ANZ: 5.84%
- Commonwealth Bank: 5.90%
- NAB & Westpac: 6.19%
These figures indicate that while relief is arriving, many borrowers are still facing elevated mortgage costs compared to pre-2022 levels.
Uncertainty Remains Over Future Rate Cuts
While the RBA’s decision to lower rates has provided some relief, experts remain divided on whether further cuts will follow in the short term.
The Australian Bureau of Statistics’ January inflation report showed only a modest reduction in inflation, from 2.7% to 2.8%, raising concerns that inflation may remain volatile.
Russel Chesler, head of investment at VanEck, suggested that another rate cut was unlikely in the near future.
“While market consensus has shifted towards an 80 per cent probability of the next cut being in May, we don’t see this happening until later in the year.”
Similarly, BetaShares chief economist David Bassanese warned that the inflation rate could still fluctuate, making an April cut unlikely. However, he noted that the trimmed mean inflation rate showed positive signs, increasing the likelihood of another rate cut in May.
