12 May 2022

What Happens If the Cash Rate Increases?

Cash Rate Increases

Everything that the government does has a ripple effect on the public. The Reserve Bank of Australia oversees economic monetary policy They also determine the cash rate since they have so much information at their disposal. Although the RBA has not increased the cash rate in 16 months, it doesn’t guarantee that they will keep them at .10%. 

When the RBA decides that it’s time for cash rate increases, it will have a ripple effect. It starts with the banks. Lending institutions engage in transactions with each other during the after hours. They swap debt or they borrow from wholesalers to finance fixed-rate mortgages. If the cash rate increases, it increases the cost of bank transactions. Since the banks incur extra costs to complete business, they seek to make up the fees. Thus, the ripple effect reaches the consumer.

After the increase, banks increase interest rates. The rate hike depends on the cash rate hike. If it’s not significant, lenders take it easy on borrowers. However, if the economy has taken a wrong, the rate hikes might become more significant. 

Mortgage House remains an innovator in the lending market. We aim to avoid surprising our clients. In addition, we provide several tools to help them hedge against significant hikes. 

Plus, you can use our online resources such as our online Mortgage House car loan calculator for free.

Cash Rate Increases Conclusion

When the cash rate increases, the interest rates will follow shortly thereafter. Even though interest rates increase, Mortgage House works with clients to provide them with competitive loan terms. Contact our lending specialists today.

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