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What do decreasing interest rates in Australia mean for you?





It is no secret that the COVID-19 pandemic is having a huge impact on people across the globe, with its ripple effect projected to impact us for years to come. As the pandemic takes its toll on global public health, it also takes a hit at the economy. The Reserve Bank of Australia has recently dropped its cash rate to a record low of 0.25%, making it one of the lowest rates Australians have ever seen. So, what does this mean for you? Take a look below to find out.


Why are interest rates decreasing?


Before we explain how the decreasing interest rates can impact you, it is important to understand why exactly this is happening. The main reason interest rates drop is to attempt to stimulate the economy. This is mainly targeted at people who are looking to borrow money, for example, to undertake home renovations or take out a loan. If interest rates are low, people who are looking at borrowing money are predicted to be more likely to do so, all while contributing to growing the economy in the process. As the global COVID-19 pandemic has impacted countries across the globe, it has also directly affected the economy. Because of this, the Reserve Bank of Australia has lowered its cash rate to attempt to stimulate the economy for Australians in these trying times.


What do decreasing interest rates mean if you are considering getting a home loan?


If you have been thinking of getting a home loan, now could be a good time to get one. As the interest rates continue to drop and the global pandemic continues to run its course, banks are working hard to attract new customers. With low, attractive fixed rates, people looking for a new home loan can shop around to find a fantastic deal on a brand-new home loan from a variety of different providers. This paired with the current decline in house prices could be a big sweetener for people who have been considering purchasing a new home with a loan.



What do decreasing interest rates mean if you already have a mortgage?


If you already have a mortgage, you may be wondering whether the decrease in interest rates will impact you. This answer can vary depending on what type of mortgage you have. If you currently have a fixed-rate mortgage, your repayments are unlikely to change, as they stay the same for the life of your loan. However, this does not mean you can’t shop around for a new, more affordable loan in the current climate. If you currently have an adjustable-rate mortgage, meaning your interest rate varies throughout the life of your loan, it is likely that you will currently be paying much lower amounts for your repayments than you have been over the past few years. Although adjustable-rate mortgages may be seen as riskier, in situations where the interest rate falls, borrowers will see their repayments decrease, saving them money in the process.


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