'And so it begins'
“And so it begins,” Westpac chief economist Luci Ellis said in response to the Reserve Bank of Australia’s (RBA) first interest rate cut in more than four years.
A dramatic response, possibly channelling King Theoden in the battle of the Hornburg, that nonetheless summed up the rapid-fire reaction to the cash rate coming down to 4.1%.
Major banks, challengers and non-bank lenders triggered immediate cuts to their floating-rate home loans, with Bluestone Home Loans, NAB, CommBank, ANZ, Westpac and others all passing through a 0.25% cut to mortgagors.
“We are very pleased to deliver this rate cut to home loan customers – we understand how tough it’s been for many Australians,” said Ana Marinkovic, NAB group executive, personal bank. “The extended period of high interest rates has placed real strain on household budgets and this rate reduction will help to ease the financial burden.
"By passing on the full 0.25% pa rate cut and maintaining our existing discount offer, we’re making it easier for more Australians – particularly those with complex financial situations – to access home loans that suit their needs,” said Bluestone chief executive officer Mark Jones.
“This move is about financial inclusion, keeping homeownership within reach and supporting brokers with solutions that help their clients succeed."
Bluestone chief commercial officer Tony MacRae drew attention to the broker benefits, telling MPA: "Brokers are at the heart of what we do, and we know their clients rely on them to find the best possible lending solutions.
“Whether it’s self-employed borrowers, those with non-standard income, or those with an imperfect credit history, this rate reduction and additional 0.25% pa offer is giving brokers opportunities to service customers."
The Mortgage and Finance Association of Australia (MFAA) also welcomed the move, with chief executive Anja Pannek saying: “The Reserve Bank’s decision will provide some much-needed relief for mortgage holders, as well as boosting borrowing capacity for prospective buyers.
“Clients will be relying on their mortgage broker to help them navigate their lending options, whether that’s securing a new loan for their first home, getting a better deal with their current lender, or refinancing.”
Pannek said there was “no doubt brokers have already been active, preparing their clients to be ‘finance ready’”.
What next?
Of course, the cut was almost universally expected by analysts, so it came as little surprise, even if some contrarians were warning of a hold.
The big question is: what will the RBA do next?
It was a decidedly hawkish hold, truth be told, with the RBA governor Michele Bullock (pictured above) saying: “We can be happy with the progress we’ve made, but we have to be careful not to get ahead of ourselves.”
Some inflation pressures remain, said Bullock, “and cost-of-living pressures are still front of mind for many Australians.”
By the sounds of Bullock's comments at the press conference, the decision to cut was not a universal one among policymakers, leaving the prospect of a gradual, rather than steep, rate-cutting cycle ahead.
The market is currently pricing in three cuts by the middle of 2026; but Bullock said this is “far too confident” for her liking.
“I can’t say ‘one and done’, what I can say is that we’ve done one, we’ve removed a bit of restrictiveness, we’re still restrictive, and we are waiting for more evidence that we’re getting inflation (down),” she said.
While that does sound hawkish, the mortgage finance industry took the win regardless.
Optimism grows
The cut to the cash rate has “been met with a huge sigh of relief by mortgage holders right across Australia”, Gerald Foley, managing director at nMB, told MPA.
“Despite a few reasons the RBA could have waited longer, there looks like enough indicators that inflation is tamed and time to give the economy a bit of a stimulus kick,” Foley said.
“Given that usually where there is one cut, there’s another just around the corner, borrowers will likely be looking out for another in April or May.”
The cut has given mortgage holders “some much-needed breathing room”, said Justine McDonald, a franchise owner at Nectar Mortgages. “A rate cut means higher borrowing power, which is great news for first-home buyers and investors. It could also drive up property prices as more buyers jump back into the market.”
However, McDonald warned that while lower rates might encourage more investment in rental properties, “the construction industry is still struggling to keep up with demand, so it won’t solve the rental crisis overnight”.
Meanwhile, Mortgage Choice broker James Algar told MPA he has already seen deal activity surge, with more to come.
“Now that the Reserve Bank has cut the cash rate, I expect brokers will be seeing those borrowers who were just falling short of being able to refinance last year,” he said. “My team and I have been extremely busy. The prospect of rates coming down has already led to an increase in the number of pre-approvals I wrote this time last year. Over January, my submissions were up 20% year on year.
“Now that the cash rate has been lowered, I think the surge in pre-approvals will continue.”
So it begins indeed, although Ellis also said that “overall, this was a hawkish set of communications.
“While the inflation and labour cost data have turned out a bit better lately… there was not a further evolution in the RBA’s thinking around the supply side,” she said. “A moderate, almost grudging, path of easing is likely from here.”
