Yesterday’s announcement of a further 25 basis points cut to the official cash rate was largely expected, but the subsequent lender’s rush to pass on the Reserve Bank’s discount was something of a surprise.
Contrary to the hours or days more commonly taken to deliberate, within three minutes of the announcement NAB became the first major lender to move, passing on the cut in full. Westpac then went one step further, reducing its variable loan rate by 0.28%, 0.03% more than the official cut. Commonwealth and several other minor lenders then followed, with reductions in-line with the official cut. By the end of Tuesday, ANZ remained the only major lender not to act, due instead to review their position on Friday.
In the lead up to the official announcement, the Greater Building Society became the first Australian lender to offer a fixed loan rate of under 4%, announcing a one-year fixed rate of 3.99%. With the official cash rate now at its lowest point since 1959, consumer loan rates have fallen to their lowest level since the GFC.
While economists continue to speculate over the possibility of further rate cuts ahead, the current environment offers good opportunity for investors to fix part of their housing loans and hedge against future interest rate rises.
With a loan split between fixed and variable components, extra repayments can still be made to an offset account, making the funds available should they be required at some point in the future. A low interest rate environment allows investors to more quickly pay down debt and consolidate their position.