The board meets on the first Tuesday of every month ( except January ) to discuss policy and potentially change the cash rate . Why would they change it ? There are a number of factors . For example , if inflation is above target , increasing the cash rate could help cool down spending by households , which could help bring inflation back down . If unemployment is too high , decreasing the cash rate could encourage more investment and spending to create more jobs .
How does the cash rate impact me ?
The cash rate is one of the main factors influencing the interest rates the banks charge on home loans and place on savings . If the cash rate goes up , variable rates on loans usually also go up , meaning if you have a variable-rate home loan , your repayments would increase . Usually savings interest rates also increase , meaning money you have in a savings account could accrue more interest ( depending on the bank ).
However , it ’ s important to note the cash rate is not the only determining factor of interest rates . Other factors include funding costs ( the cost for the lender to borrow money - where the cash rate plays a role ), competition from other banks and risk of default ( if a loan is considered riskier , it ’ s likely it will attract a higher interest rate ).
The information provided in this article is on the understanding that it is for illustrative and discussion purposes only . Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances . Terms , conditions , fees and charges may apply . Normal lending criteria apply . Rates subject to change . Approved applicants only .
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