The seemingly never-ending cycle of news stories around the current COVID-19 situation was heavily added to yesterday, as the Reserve Bank of Australia cut rates, mid-month, in an effort to ease the burden this crisis is causing.
After holding an emergency meeting on the 19th of March, the RBA cut rates to a historic low of 0.25%. It has previously been communicated that this cut would bring the RBA to their floor, with no additional cuts anticipated. Which in turn will add pressure to the banks to once again pass on this cut.
When speaking with Capita Finance General Manager, Gill McLean, she explained to us that “over the coming days and weeks, we will see both the big and small banks take up reactionary measures to this cut. With new rates announced, possible new products announced, and many more reasons for consumers to be making the call to adjust their loans to the most suitable product available to them”. In terms of the market reaction, Mrs McLean went on to say “the lender market will now feel a tremendous amount of competition, with already low rates, and now the added economic impact of COVID-19, consumers will now more than ever want to reassess”.
The Canstar Group analysis reported that if the latest 0.25% cut was passed on by lenders, that consumers would likely see an additional $56 of savings each month, on average. While there is little confidence this will spike consumer spending, the objective is to ease pressure amidst the current crisis.
It is understood that as of right now, businesses have not seen the roll-on effects of the cuts and additional savings. Consumers, in the current economic environment, are seen to be tightening their belts in response to the unknown. Canstar group executive of financial services, Steve Mickenbecker, explained that “there is little point in the RBA saving what's left of the cash rate for a rainy day, when today is a cyclone”.
Mrs McLean added her final thoughts by saying “while we appreciate how confronting a time like this can be, we wish to remind our clients, and the community as a whole, that we are in this together. We as a financial group, are here to support you and guide you with our expertise”.
In a time where we can begin to feel very isolated, and often deeply concerned, we should not shy away from the opportunities that can help us through. If you are looking for financial assistance or think now may be the right time to review your finances, speak with a dedicated Capita Broker today.
If you are looking to explore your finances as a whole, and review your current standing and security, begin your conversation with our Financial Planning team.