First Rate Cut in Four Years Brings Relief to South Australian Borrowers

The Reserve Bank of Australia has cut interest rates for the first time since November 2020, lowering the cash rate by 25 basis points from 4.35 per cent to 4.10 per cent at its February meeting.

Why the Reserve Bank moved

In its statement, the Reserve Bank Board said underlying inflation had moderated faster than expected, with the measure at 3.2 per cent in the December quarter. Wage pressures had eased and the recovery in private demand was proceeding more slowly than anticipated.

The Board was careful not to promise more. It said monetary policy would remain restrictive after the cut, that upside risks remained, and that easing policy too quickly could stall progress on inflation. Governor Michele Bullock said the Board could not guarantee further reductions and cautioned against market expectations of a series of cuts.

What it means for repayments

If lenders pass on the reduction in full, ABC News calculated that a borrower with a $500,000 mortgage would save about $77 a month. On a $750,000 loan the saving is about $115 a month, and on a $1 million loan about $154.

South Australia’s own lenders have moved to pass the cut on to variable-rate home loan customers. People’s Choice announced a 25 basis point reduction taking effect on 4 March, Credit Union SA on 5 March and Adelaide Bank on 7 March, according to a lender tracker compiled by Savings.com.au.

What to watch

• Further Reserve Bank decisions, which the Board says will depend on incoming data rather than a set path.
• Mortgage holders with variable loans, who will see lower repayments as lender cuts take effect in early March.