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Interest rate cut looming

With the latest data from the Australian Bureau of Statistics showing the Australian economy is not performing strongly, there is a good possibility that the Reserve Bank will choose to cut the official cash rate again at tomorrow's board meeting.

The latest figures from the Australian Bureau of Statistics showed that retail spending dropped by 0.20 per cent in April compared to March. A rate reduction could help improve consumer confidence and therefore drive spending.

The current average standard variable home loan rate is now 6.61 per cent, but most borrowers are already paying less than that after discounts. A 25 basis point rate cut would therefore mean borrowers could expect to see variable rates in the low 6 per cent to high 5 per cent range. If lenders pass on the full 25 basis points cut, monthly repayments for a $300,000 mortgage would drop by $49.
Even if the Reserve Bank cuts the official cash rate again tomorrow, it is unlikely that all or any of Australia’s lenders will pass on the rate cut in full, as they seek to recover higher funding costs.