The NAB and CBA have today announced a reduction in their variable mortgage rates of 0.2%.

While this is not the full 0.25% cut by the Reserve Bank on Tuesday, it is certainly welcomed by all of us with a mortgage.

NAB’s cut will come into effect on October 8, saving $50 per month on an average $300,000 mortgage.

The move is the first from the big four banks with the remaining three giving little indication of their plans to pass on the rates cut.

The big four banks’ standard variable home loan rates currently stand at (and should all be 0.20% lower very shortly).

  • NAB 6.58
  • CBA 6.80
  • ANZ 6.80
  • Westpac 6.89

I believe that some fixed mortgage rates could be less than 5% by Christmas and we do expect a further 0.25% reduction in the official cash rate either in November or December.

This weekend should see some further improvement in the property auction clearance rates.

Great time to review your mortgages

Sometimes the banks are not pro-active in not passing on the maximum discounts.

Consequently it’s a good time to carefully review your current interest rates and fees with alternative banks.

Impact on superannuation and investments

Reducing interest rates is normally positive for the Australian Share Market which was up to 4503 (and increase of 0.75% today).

We regularly review our clients’ portfolios and are very happy to report a significant improvement in most account balances.

However, while a reduction in interest rates is great for people with a mortgage, it is not good news for people that are investing in cash and term deposits and relying on that income.

When at call interest rates are trending lower, fixed interest and bonds normally appreciate in value. Understanding the characteristics of alternative investments is important.

With that in mind it is now a good time to review your investment portfolio to ensure the asset allocation to cash, bonds, shares and property is still appropriate for you at this time.

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