At their August meeting, The Reserve Bank (RBA) has decreased the cash rate by 0.25%, making the cash rate 3.60%.

The board cited moderating inflationary pressures and a tight labor market as the key drivers for its decision. Most people with mortgages will no doubt be elated.

Much commentary suggests that The RBA is still monitoring inflation and their target band is between 2% and 3%. Any future reduction in the RBA Cash rate is not a certainty. Remember, The RBA does not control the lending interest rate set by the banks. Financial markets and commentators are still factoring in a further decrease in the cash rate this calendar year.

Financial institutions have all passed on the full 0.25% interest rate reduction on new lending and existing loans for their customers. Just as a segue, an interest rate reduction will no doubt lead to lenders adjusting their Household Expenses Monthly (HEM). This could possibly affect the borrowing capacity.

 

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