As a finance broker, it’s crucial to keep a close eye on the historical trends in interest rates. The cash rate, set by the Reserve Bank of Australia (RBA), has a significant impact on mortgage rates. Over the years, the cash rate has seen many fluctuations, which, in turn, affects mortgage rates. In this blog, We would like to take a look at the historical trend of the cash rate and what it means for those looking to get a new loan or refinance.
The cash rate is the interest rate that banks pay or receive on overnight loans. The RBA sets the cash rate to achieve its inflation target of 2-3% over the medium term. Back in the 1990s, the cash rate was high, and interest rates on mortgages were also high. In 1990, the cash rate was at its peak of 17.5%. This meant that mortgage rates were also high, and homeowners were paying a significant amount of interest on their loans. However, over the years, the cash rate has been on a downward trend, reaching a record low of 0.10% in November 2020.
In February 2022, the RBA increased the cash rate by 0.25% to 3.35%. This was the first increase in interest rates since November 2020. Since the start of 2022, the cash rate target of the Reserve Bank of Australia has increased by 2.25 percentage points.
The recent increase in interest rates means that borrowing money will be more expensive. For those looking to get a new loan, the increase in interest rates means that banks will increase their interest rates to reflect the higher cash rate.
For those looking to refinance, it’s still worth exploring refinancing options, especially if you’re on a higher interest rate. Refinancing can help you save money on interest payments.
As a finance broker, we understand that the recent increase in interest rates can be concerning for those looking to get a new loan or refinance. However, it’s important to explore your options and find the best deal for your needs. We can help you navigate the complex world of mortgages and find the best deal for you. Contact Grokfin today to see how we can help you with your needs.
