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Interest rate cut June 2019 | How far will they fall?

In the latest Reserve Bank decision on Tuesday, 4 June 2019, the Official Cash Rate has been dropped to a record low of 1.25%, with most banks pledging to pass on the rate cut to customers.

Lower interest rates can be a ‘double edge sword’ as the pros and cons for Australians largely depend on individual circumstances.

Pros

  • Current variable rate mortgage holders will have a drop-in interest repayments
  • Greater potential borrowing capacity as loan serviceability will increase due to decreased mortgage costs; and
  • Increased profitability for the exporting sector with a potential lowering of the Australian dollar.

Cons

  • First Home Buyers may face higher property prices
  • Anyone holding deposits earning interest will likely receive lower interest
  • Potential increase in the cost of imported goods to Australia with the potential weakening of the Australian Dollar. This will be felt across importing businesses with decreasing profit margins, and for consumers with increased cost of imported goods.
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