The decision from the Reserve Bank (RBA) is unsurprising, as most economists agreed the rate would remain unchanged.
The RBA had previously indicated the cash rate had reached its floor and had no appetite for negative interest rates, and there would be no increase to the rate until inflation was between 2-3% and progress towards full employment had been reached.
Prior to the announcement, there had been some speculation the RBA may cut the rate to 0.10% based on comments from Governor Phillip Lowe, but it remains at 0.25% for at least one more month.
Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 Star Customer Ratings |
| Promoted | Disclosure | |||||||||
5.99% p.a. | 5.90% p.a. | $2,995 | Principal & Interest | Variable | $0 | $0 | 80% | Apply in minutes |
| Promoted | Disclosure | |||||||||
6.09% p.a. | 6.11% p.a. | $3,027 | Principal & Interest | Variable | $0 | $250 | 60% |
| Promoted | Disclosure | ||||||||||
5.69% p.a. | 6.16% p.a. | $2,899 | Principal & Interest | Fixed | $0 | $530 | 90% |
| Promoted | Disclosure |
Dr Lowe said although the economy was experiencing its worst contraction in 90 years, there was reason for optimism, but expressed concerns about the crisis in Melbourne.
"As difficult as this is, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia," Dr Lowe said.
"This recovery is, however, likely to be both uneven and bumpy, with the coronavirus outbreak in Victoria having a major effect on the Victorian economy."
Dr Lowe said a baseline scenario would see the unemployment rate peak at 10% as restrictions in Victoria meant the shutdown of non-essential businesses.
"In this scenario, the unemployment rate rises to around 10% later in 2020 due to further job losses in Victoria and more people elsewhere in Australia looking for jobs," he said.
"Over the following couple of years, the unemployment rate is expected to decline gradually to around 7%."
The RBA Governor said the speed of any sort of economic recovery rested solely on flattening the curve.
"A stronger recovery is possible if progress is made in containing the virus in the near future," he said.
"This progress would support an improvement in confidence and a less cautious approach by households and businesses to their spending.
"On the other hand, if Australia and other countries were to experience further widespread lockdowns, the recovery in both output and the labour market would be delayed."
Record-low cash rate supporting borrowers
CoreLogic Head of Research Eliza Owen said the record-low cash rate and RBA's bond purchasing was helping borrowers to lower costs through refinancing.
"ABS (Australian Bureau of Statistics) data suggests the total value of externally refinanced loans increased 25.1% in May," Ms Owen said.
"Since March, almost $40 billion in home loans has been externally refinanced.
"Additionally, the average variable lending rate for new owner-occupier mortgages fell to just 2.93% over May, which is down 33 basis points since the start of the year."
Mortgage Choice Chief Executive Officer Susan Mitchell said the RBA was helping to support the housing market from the fallout from the pandemic.
"The historic low cash rate continues to support a low cost of borrowing for Australians, which combined with Government incentives appears to be cushioning the pandemic’s impact on the nation’s housing market for now,” Ms Mitchell said.
But with house prices falling for three consecutive months, Ms Mitchell said it was likely this trend would continue.
“The latest CoreLogic Hedonic Home Value Index revealed that Australian dwelling values fell 0.6% in July, led by Melbourne and Sydney, which recorded declines of 1.2% and 0.9% respectively," she said.
"As the virus continues to put a strain on household budgets and consumer sentiment we are likely to see further deterioration in the months ahead.”
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