10 May 2022

How Do RBA Cash Rates Affect Banks?

RBA Cash Rates and Lenders

Since Australia uses the Reserve Bank to establish monetary policy, interest rates will fluctuate based on the RBA’s decision. On April 5, 2022, the RBA decided to keep the .10% cash rate. Therefore, the RBA cash rates did not cause the cost of borrowing to increase for lenders or the public. It’s always good news when prices don’t increase again.

The cash rate is the amount that it costs for lenders to complete transactions with each other during the after hours. When the RBA decides to raise the cash rate, it makes borrowing among lenders more expensive. Lenders swap debt and banks borrow from wholesalers to fund fixed rate mortgages. 

The cost of goods and services always makes its way to the consumer. Therefore, if banks incur higher costs to borrow and complete transactions, they pass on the costs to the public. If the RBA increases the cash rate, interest rates for consumers will increase too. 

Mortgage House opened its doors in 1986. Our operation has always taken an innovator role in the lending market in the Australian housing market. Therefore, we have tools that help clients manage the cost to borrow money. In addition, we provide an array of products. Our lending specialists work to find the best loan product for most clients and their financial circumstances. 

RBA Cash Rates and Lenders Conclusion

When RBA cash rates increase, it increases the amount it costs for lenders to borrow from each other. The increase will trickle into mortgages and home loans too. Mortgage House customers can still enjoy competitive rates. Contact our lending specialists to find out more.

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