You might have heard the Reserve Bank of Australia, or RBA, mentioned when interest rates and house prices are talked about. This is because the RBA sets the cash rate, which is an interest rate banks pay on money they borrow from other banks.
Understanding the cash rate
The RBA is Australia’s central bank. It’s responsible for keeping Australia’s economy healthy by printing and issuing our currency, taking care of monetary policy, and finding ways to safeguard Australia’s financial system.
One way the RBA maintains a strong financial system in Australia is by setting Australia’s official cash rate. The cash rate is the name given to the interest rate on very short-term loans made between banks. It’s also called the overnight money market interest rate.
Although this rate is only available to banks, it influences the rates all consumers and businesses pay – including the interest rate on your home loan.
How lenders set interest rates
Although the cash rate is an important benchmark for banks and other lenders when they’re setting their rates, lenders set their own interest rates based on a range of considerations. This is why interest rates can change even when the cash rate stays the same. For example, lenders might lower rates to attract more customers, or they may increase rates if they’re concerned about market risks. It’s also helpful to keep in mind that any rate-related decisions a bank makes take the needs of both deposit holders and home loan customers into account.
One way home loan customers can protect themselves against fluctuating interest rates is to choose a fixed rate loan. With fixed rates, your interest rate stays the same for a fixed period at the start of your loan term. You can generally choose fixed rate periods of between one and five years. Learn more about Suncorp Bank’s fixed rate and variable rate home loans and compare their rates and features.
Get expert guidance on all your home loan questions
Knowing how Reserve Bank decisions can affect your home loan interest rate can be illuminating, but good home loan advice is even more important. If you’re keen for a few pointers about what could be right for you, Suncorp Bank’s lending experts can help. All consultations are 100% obligation-free.
Published 28 January 2022
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Australia and New Zealand Banking Group Limited (ABN 11 005 357 522) (ANZ) acquired Norfina Limited (ABN 66 010 831 722 (Suncorp Bank) on 31 July 2024. As Suncorp Bank is now part of the ANZ Group, it may be necessary to vary the terms of your Suncorp Bank product to match the terms of a similar ANZ product. This means you may end up with a product that has different terms and features to those you initially applied for. In any event, Suncorp Bank will provide you with a more detailed notice of these changes if the variation applies to your products. A full list of these changes for each product can be found at suncorpbank.com.au/variation. Please contact us if you have any questions or if there is a feature that is important to you.
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