What is the Reserve Bank of Australia?
The Reserve Bank of Australia (RBA), cash rate and interest rate – what are they, what do they mean and how do they relate? Let us explain!
The RBA is Australia’s central bank which oversees our monetary
One of the monetary policy decisions made by the RBA is setting Australia’s official cash rate. Every month the RBA reviews the cash rate, which is the interest rate on overnight loans in the money market. Based on the monthly review, the RBA will either hold, increase or decrease the cash rate.
This cash rate isn’t the interest rate you’ll pay on your home loan, but when a lender is setting their interest rates, they will take into consideration the cash rate.
Home loan interest rates are indicative of what it costs the lender to borrow money to lend to you, combined with a small margin to help them provide for the running cost and make some profit.
Sometimes when the cash rate increases or decreases, so too can home loan interest rates, but not always. A lender can decide whether or not they pass on any increases or reductions to the cash rate to borrowers. There are also occasions when a lender changes their interest rate on a home loan when the cash rate hasn’t changed. These are called out of cycle rate
If you have a fixed interest home loan, you will be protected from any changes to the cash rate or out of cycle rate changes made by your lender.
Want to know more? Learn more about the type of interest rates available when you’re choosing a loan or give an Aussie Broker a call with any questions.
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- Chapter One : Getting started
- Chapter Two : Your dream home
- Chapter Three : Money matters
- Chapter Four : Ways to purchase
- Chapter Five : Understanding interest rates
- Chapter Six : Understanding home loans
- Chapter Seven : Lending sources
- Chapter Eight : Getting your loan
- Chapter Nine : Choosing a home
- Chapter Ten : Steps to settlement