Feb 03

No Relief yet for those looking for longer term loans

In recent weeks I’ve spoken with a few people who were waiting for the Reserve Bank to drop cash rates before looking to fix their mortgages for the long term. The chart above shows the change in government bond yields from last Thursday (29 January) to today (3 February) after the Reserve Bank dropped interest rates from 4.25% to 3.25%. Despite the massive drop in the RBA Cash rate to the lowest level since 1964, there is very little change in the longer term government bond yields. In fact, if anything the yields have increased slightly.

Given fixed rate loans are related to the longer dated part of the yield curve (really up to the 5 year mark), those looking for lower interest rates on longer term loans like car leases, fixed rate mortgages, personal loans etc. may have to wait a little longer before there is significant change.

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