October update: Reserve Bank leave rates on hold at 2.5%
The Reserve Bank of Australia has decided, as expected, to leave the cash rate on hold at 2.50 percent this month, following its October board meeting in Sydney today.
The decision to hold keeps the cash rate at records lows, according to Australia’s leading financial comparison website, RateCity (www.ratecity.com.au). It also means that the current low interest rates also on offer are likely to remain in place.
Alex Parsons, CEO of RateCity.com.au said despite no movement to the cash rate today, variable borrowers with a typical $300,000 home loan would be around $600 better off by the end of the year based on the previous two rate cuts in May and August 2013.
“Since January we’ve seen the cash rate slashed by 0.50 percentage points, with rate cuts handed down in May and August representing big saving for some variable borrowers,” he said.
“Compared with this time last year, variable borrowers are now paying $171 less per month on average to service the same $300,000 home loan.”
While these savings are great news for borrowers, many Australians could be even better off by refinancing into some of the lowest rates, RateCity calculations show.
“Switching from the average basic variable rate to one of the lowest advertised variable rates could free up almost $1000 over the first year, assuming rates remain steady.
“If your home loan rate starts with a 5 then you’re wasting money. Consider switching today – there are 26 variable home loans with rates below the average rate of 5.2 percent, starting from just 4.74 percent. Fixed rates are starting at 4.29 percent for a one year fixed term.”
As for savers, Parsons said the RBA’s decision to keep rates on hold would continue the poor returns savers are realising today. He urged savers to shop around and compare rates.
“While many savings accounts offer rates around the 3 percent mark, it is possible to find high interest savers paying a maximum rate of up to 4.77 percent, so it’s vital that savers shop around to ensure they are maximising their profit margin.”