Record low cash rate announced

3rd May 2016

The Reserve Bank of Australia (RBA) has cut the cash rate to an historic low of 1.75%, effective as of 4 May 2016.

The rate cut was decided after information emerged that “inflationary pressures are lower than expected”, according to RBA governor Glenn Stevens.

"In reaching today's decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate, " says Stevens.

"We are witnessing the lowest cash rate since the inception of the current monetary policy framework in 1990"

So what does this mean for the average Australian? Well, the cash rate is essentially the interest rate at which the RBA will offer overnight loans to banks and lenders. If the cash rate goes down, home loan interest rates will likely follow.

This flow on effect appears to have already started, with NAB taking charge and announcing reduced interest rates just moments after the RBA announcement. Other banks have since followed suit.

The 25 basis point reduction means we are witnessing the lowest cash rate since the inception of the current RBA monetary policy framework in 1990. Back then, the cash rate sat at 17.50%, which puts into perspective how incredibly low the 1.75% rate is at present.

If you are considering buying your first home, strengthening your property investment portfolio, or refinancing your current mortgage, now is the time to do it.

Contact your local broker today, and they will demonstrate how you can benefit from this record low rate.

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