One in five Australians caught out the rate cut that never came

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Nearly one in five Australians was left hanging after making financial decisions to prepare for a rate cut that never came, according to new research from

The survey found that 17 per cent of Australians actively made decisions in the expectation the Reserve Bank of Australia (RBA) would announce its fourth rate cut last October. But the change never came.

Of this percentage, 31 per cent took out, or switched to, a variable personal loan, home loan or car loan in expectation of lower rates, while 11 per cent borrowed more on their home loan, thinking interest rates would fall a further 0.25 to 0.5 percentage points.

Also, 10 per cent ramped up their spending towards the end of 2019, and eight per cent began planning for bigger purchases such as holidays.

The results indicate how many Australians will take any opportunity to borrow big regardless of risk.

“For borrowers who expected the fourth rate cut last year, we can see that many chose to increase their borrowing rather than pay down more of the principal and pay debt off faster,” said spokesperson Helen Baker.

Apart from Australians’ seeming lack of concern around debt levels, Ms Baker said it showed Australians were confident “their employment income will continue, and they are comfortable with their ability to service loans at a higher level”.

She added that these same people were unlikely to have concerns that reduced interest rates were “a form of stimulus to deal with bigger economic problems at play, such as low wage growth and a poorly performing retail sector”.

The RBA is expected to announce a 0.25 per cent rate cut at 10am Tuesday morning.

The revised forecast comes after Australia’s sharemarket has fallen for seven consecutive sessions and closed at a six-month low last night.

Did you make any financial decisions in anticipation of an October rate cut? Or did you play it safe? How will the next rate cut influence your financial decisions?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?



Total Comments: 25
  1. 0

    Yes or course, “the RBA is expected to announce a 0.25 per cent rate cut”. That should sort out any problems with the economy. It’s amusing to watch. Didn’t Einstein say the definition of insanity is to keep doing the same thing over and over expecting a different result”

  2. 0

    Statistically the odds of a cut in interest rates is one in three or 2/1 against. I’m not sure
    whether the financial pundits are aware that their predictions have a 67% of being
    incorrect …..

  3. 0

    No surprised – Europe charges you to keep your money in the bank. Most probably comes here as well – reason why property prices are lifting endlessly.

    • 0

      Yes and the reason cash spends over $10 000 are forbidden and a welfare card being rolled out. The only way to stop people going to cash at negative rates is by compulsion.

      It’s why Sweden has gone cashless and has negative rates.

    • 0

      Talk about a transaction tax and business has dire warnings about how bad that is but apparently a banking fee on every dollar is okay. I think the economists have gone mad and really can’t see any rational solutions such as raising Newstart and getting extra money into lower income earners wallets.

  4. 0

    I think you’ll find that the RBA does not announce rate decisions at 10am, but rather at 2:30pm!!!!

  5. 0

    I think you’ll find that the RBA does not announce rate decisions at 10am, but rather at 2:30pm!!!!

  6. 0

    They weren’t caught out. They gambled on a decision they thought would be made. It didnt work out.

  7. 0

    I never make any decisions, financial or otherwise, with reference to external organisations. My financial decisions are based on ‘can we afford it now’ and other decisions are based on ‘do I really need or want it’. The RBA does not pay my bills.

  8. 0

    I would never make a financial decision based on a best case scenario e.g. interest rates reductions, salary increases etc. When I took on a mortgage I made sure that I only borrowed an amount that I could afford to pay at the time plus 5% So at the time the interest rate was around 5.7% and I wanted to be able to continue to repay the loan if the interest rate climbed to 10-11% and my salary stayed the same.It would have been foolish at the time to have factored in salary rises when in reality I only received 2 small increases in 10 years. As it happened I dodn’t get pay rises but the interest rate dropped, I kept the payments the same as they were before the decrease and paid fortnightly. This way you end up way ahead and I now have no mortgage.

    I find it very difficult to be sympathetic to those who make financial decisions they know they cannot afford then cry when it all goes pear shaped (whether overspending on a credit card, taking a loan to buy a car or a mortgage on a house they can’t afford).

    • 0

      agree – it seems ” prudent financial management ” is quickly becoming a lost art……

    • 0

      KSS – glad it worked out for you. We signed at 8.5% in early 1978 and ended up at 16.4% in 1983. Sold up and put the money on term of 24 months a 18%. After that we bought a house again. Looking forward with an eye on past experiences.

  9. 0

    Why is everyone so concerned about the interest rate going down? How about thinking about the poor pensioners who have a little money saved while working and paying tax all their working lives and are now penalised every time the interest rate goes down. Come on people, when we were paying back our loans the interest rate went up to 17%. Stop complaining and do what you need to do to get by. Work harder, we did.

  10. 0

    There is too much concentration on making more money by those who are already well off. Those of us who are not in that well off category, but comfortable, survive by being modest with our expenditures and survive quite well thank you.
    The old saying “the love of money is the root of all evil” is still true and spending your life trying to get more than you really need is frankly silly.

    • 0

      As an ordinary slightly above median earner for 43 years paying 37% top tax I am furious that tax for high income earners is dropping to 30%. Why can’t these people support their Country like we did.

      After tax and super I had to be modest because there wasn’t much left to allow any splurging or borrowing.

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