Variable home loan rates at 2-year low: what should property investors do with the rate cut?

In a recent statement Michelle Hutchison, Spokesperson for Australia’s leading financial comparison website RateCity commented on the following to topics which are of interest to property investors and home buyers. 

  • What is the likely decision of the RBA when it meets next week?
  • With standard variable home loans at 2-year lows, what should borrowers do with the rate cuts?

Reserve Bank likely to pause official cash rate at 3.50%

“After two months of consecutive rate cuts, it’s unlikely that the Reserve Bank will lower the cash rate at its board meeting next week. The cash rate has fallen by 75 basis points this year and we haven’t yet seen the full effects of these cuts as it generally takes a few months to filter through to the economy.” said Ms Hutchison.

“For instance, when it comes to variable home loans, most lenders take two-three weeks from a Reserve Bank rate cut to make a decision on moving their rates. The effective rate may take another week to be passed onto variable home loan borrowers and it won’t be until the following month (depending on borrowers’ repayment schedules) until borrowers will see a difference to their repayments. Borrowers may then take a while before they adjust their spending or borrowing habits.

“With this in mind and mixed news of the European debt crisis, we expect the RBA to hold fire this month.”

Variable home loan rates at 2-year low: what should borrowers do with the rate cut?

“The recent rate cuts have left the average standard variable home loan rate across more than 100 lenders in RateCity’s database at 6.42%. We haven’t seen the average standard variable rate this low in more than two years, when it was 6.31% in March 2010.

Variable borrowers with a $300,000 home loan are saving on average $82 per month compared to January (see table below).

“With financial uncertainty still looming offshore, we are urging borrowers to use their extra cash wisely and keep their mortgage repayments at the same levels as before the rate cuts or pay down other debts such as credit cards. That way if rates increase in the future, borrowers will minimise the impact by reducing their debts and having a buffer to draw upon if they need to.”

Changes in monthly repayments since January 2012

Home loan size

Monthly mortgage repayments in January 2012

Monthly mortgage repayments in July 2012

Savings in monthly repayments since January 2012













Source:, based on current average standard variable home loan rate of 6.42% compared to 6.83% in January 2012 for loan term of 30 years, rounded to the nearest dollar.



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'Variable home loan rates at 2-year low: what should property investors do with the rate cut?' have 3 comments


    June 29, 2012 opinder singh

    Hi Michael,
    My path is clearly the same as yours to achieve capital growth.
    Someone mentioned about NRAS to me as you know ppl out there try to sell everything.
    So I mentioned it you.
    I never heard about this type of investment and obviously staying away from this.
    Thanks heaps for the reply Michael.
    I keep following you and your blog daily.
    Thanks again..:)


    Michael Yardney

    June 29, 2012 Michael Yardney

    I don’t know what your property investment strategy is, but if it is to achieve capital growth, which is my preferred strategy, then NRAS properties are clearly not the way to go.

    My understanding is the scheme has been a failure. It has not been embraced by invetsors and banks have some issues with it.



    June 29, 2012 opinder

    Hi Michael
    what are your views on government scheme of properties
    Thanks a lot


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