RBA delivers first rate cut since 2020

At the February board meeting the Reserve Bank of Australia (RBA) provided home loan customers with some relief by lowering the official cash rate by 0.25% to 4.10%.

According to the RBA Underlying inflation is moderating

The RBA reported that Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.

The RBA went on to say that in the December quarter underlying inflation was 3.2 per cent, which suggests inflationary pressures are easing a little more quickly than expected. There has also been continued subdued growth in private demand and wage pressures have eased.

These factors give the Board more confidence that inflation is moving sustainably towards the midpoint of the 2–3 per cent target range.

However, the RBA noted that upside risks remain. Some recent labour market data have been unexpectedly strong, suggesting that the labour market may be somewhat tighter than previously thought. The central forecast for underlying inflation, which is based on the cash rate path implied by financial markets, has been revised up a little over 2026. So, while today’s policy decision recognises the welcome progress on inflation, the Board remains cautious on prospects for further policy easing.

What does the above mean?

In basic terms, the RBA is not saying inflation risks are over and that we will see a continued cycle of rate cuts.

The RBA is still cautious and every board meeting to review rates will assess conditions at that time.

For now though, it’s some welcome relief and for the average home loan customer, they should be better off by around $100 per month.

What can you do whilst you’re waiting for rates to drop further?

There are 2 key stapes you may want to consider.

1. If your budget is not already overstretched, try and save all or part of the rate cut as that helps build up a buffer in your home loan. Every little bit helps and that can help you with an emergency purchase down the track
2. Double down on the rate cut and review your home loan. It’s a very easy process now and can be done remotely with a professional loan writer, with not much paperwork requirements. If you can save another 0.25% on your rate, that can double the RBA savings you’re getting

If you’re keen to switch and save, or just have a free home loan review, get in touch with one of our local specialists today. Understanding your options can start with a simple phone, web, or in person discussion.

This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.