Interest-ing Movements

The Official Cash Rate has been cut to historic lows - but what does this mean for consumers?

What is the cash rate?

The Official Cash Rate (OCR) is the interest rate for overnight loans between banks and other financial organisations. The OCR is set by the Reserve Bank of Australia (RBA), with a lower OCR generally resulting in a lower interest rate on home loans and savings.

Why was the OCR cut?

The OCR is a key lever of economic growth. In past months purchases by households, as measured by the price of things like groceries and TVs (also known as inflation) came in lower than expected. As a result, the RBA cut the OCR on 4 June and 2 July to stimulate spending, investing and borrowing by Australians – all of which helps the economy grow. 

What does this mean for me?

Borrowers with variable rate home loans are likely to save money.

“On an average home loan of $340,000 Queensland households could to save around $50 per month,” RACQ Bank CEO Michelle Bagnall said. 

Savers, however, could be impacted as the Reserve Bank’s decision will reduce the rates on investments like term deposits and savings accounts.

Will there be more rate cuts?

It's possible rates could be cut again this year, but the Reserve Bank will likely wait to see the effect of this rate decision. 

The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.