Rates reach new low of 0.25% as RBA moves to protect the economy.
In an unprecedented move, the RBA met outside its scheduled monthly meetings to drop the official cash rate from 0.5% to a new lower low of 0.25%. The reason for this – Coronavirus.
Around the world the impact of the coronavirus on health systems first and foremost, but on economic systems is becoming more apparent.
The RBA has long signalled that it’s willing to be unconventional and bold in its efforts to protect the economy and today’s policy announcement proves it.
The main announcement from today is the cut in the official cash rate. It now sits at the lowest it ever has at 0.25%. Borrowing has never been cheaper. We’ll now look to all the major lenders as they will be under pressure to pass on the full rate cut to borrowers. Make sure you check your loan rate to ensure that you’re lender is passing on the lower rate to you. If not, give us a call.
In the statement, Philip Lowe acknowledge that while Coronavirus is primarily a public health issues it is also ‘having a very major impact on the economy and the financial system’. Travel restrictions and social distancing measures are having significant flow-on effects on economic activity. Share market downturns have also impacted on people’s investment savings, particularly for retirees.
Lowering the rate will help mortgagee holders and take some of the pressure off households.
If you’re worried about the impact Coronavirus is having on your ability to make your mortgage repayments, please contact us. Lenders have a range of options they can offer to clients in times of financial hardship. This could be shifting to interest only payments for a while or even in some cases deferring payments. Let us change your worry into action, we’ll help you work out your best options and can speak on your behalf to the bank.
Today’s announcement didn’t end with the rate cut. Governor Lowe also announced an unprecedented program of quantitative easing including buying back government bonds, a 3-year funding facility to authorised deposit-taking institutions (or ADIs) at a fixed-rate of 0.25%, and increase in exchange settlement balances at the RBA to 10 basis points (up from zero).
The RBA emphasised that the economy is in a good position to recover once the threat of Covid-19 is contained:
At some point, the virus will be contained and the Australian economy will recover. In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly.
These are uncertain times, but it’s important to stay in control of your money. Contact us now and we’ll help you do a home loan health check so you can be in the best position possible as the economy recovers.