What the latest RBA cash rate cuts mean for first home buyers

What the latest RBA cash rate cuts mean for first home buyers

The Reserve Bank of Australia has slashed the official cash rate to a historic low of 0.5 per cent with more than 35 lenders, including the big four – Commonwealth Bank, Westpac, National Australia Bank and ANZ – passing the rate cut on to customers by reducing their variable home loan rates.

In a nutshell, variable loan repayments become cheaper. The variable rate is the interest you pay on your mortgage, and as the name suggests, it varies throughout the course of your mortgage repayments, and is influenced by the RBA’s recommendations.

What does this mean for first home buyers?

For first home buyers, the idea of getting a home loan may become more appealing, with a smaller amount of interest to pay back. When the banks announced an unprecedented reduction (0.25 percentage points) in the variable rate, those with a variable home loan (and those applying for one) will now be paying their mortgage back with the smallest amount of interest they’ve ever paid before.

What about fixed home loans?

For those home buyers with fixed loan contracts, you won’t get to enjoy the benefits of further interest cuts as your loan is set at a fixed rate. However, if you are looking to buy a home during this time, and choose a fixed loan, you will reap the benefits of securing a loan at a record low.

The choice of variable or fixed home loan is up to you, and both come with pros and cons. If you’re unsure which home loan to go with, compare rates or chat to a mortgage broker (it’s free to talk to one!) to get the best deal.

What now?

Settling on a house is only one part of the journey. There are many different steps to owning your own home, which have become easier with the lowering of variable home loan rates, and the introduction of government grants to help young first home buyers, and the Australian property market.

It should come as no surprise that the RBA cut rates as a way to mitigate the current economic downturn, in response to the Coronavirus pandemic. As we sit back and watch the events unfold, we can’t be sure how long the rates will remain as low as they are or if further cuts will take place, but it’s an interesting time for first home buyers, and the Australian property market.

Want to check how much your repayments could be on a PDX home? Simply select a home design you like, and what deposit you have, and we’ll estimate your weekly repayment.

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