Understanding finance-speak is important when entering into a home loan. If you know the basic financial terms, you can easily follow the trends and conduct your own research to make the best choices when it comes to your own financial situation.
One such term that is referred to often and affects the entire Australian housing market is the cash rate.
What is the cash rate?
The term “cash rate”, otherwise known as the official cash rate, is the interest rate set by the Reserve Bank of Australia (RBA) that banks then pay or charge to borrow funds from other banks in the overnight market. The RBA, which is Australia’s central bank, can then regulate the rate paid for cash by the sale or purchase of bonds.
This sale process affects the supply of money, which then influences the interest rate set by the RBA. Financial institutions then follow suit and can make changes to their interest rates accordingly. Changes to the cash rate affect the economy as a whole, especially the housing market, because mortgage rates generally follow the cash rate.
If you are ready to take the next step and purchase a new home, make sure you compare current interest rates on offer by Australia’s top mortgage lenders. Launch your search now with RateCity’s home loan comparison tool.
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