Interest rate cut will leave more cash in homeowners’ pockets

THE first official rate cut since 2013 has combined with plunging petrol prices and the axing of the carbon tax to leave the average family in regional Victoria with a variable home loan more than $120 a month better off compared with a year ago.

In Melbourne, a family with a variable home loan is about $150 a month ahead, provided the Reserve Bank of Australia’s 0.25 per cent reduction is passed on in full by lenders.

Households there will save an average of $37 a month on their loan, while the 53c a litre drop at city servos shaves a further $108 from outgoings. The removal of the carbon price has lowered electricity bills by an additional $9.

The savings for households in regional areas — where mortgages are 30 per cent smaller than in Melbourne and there’s been a 13c a litre drop in the fuel price — add up to $27 a month less on the mortgage, $86 on petrol and $9 on a carbon charge.

Those who have recently taken out a home loan are an extra $12 a month in front, because typically they have a bigger-than-average mortgage.

While families are now enjoying significant falls in key expenses, they are sorely needed in households enduring substantial rises in the cost of childcare, up 9.5 per cent in Melbourne in 2014 and health, which increased 4.6 per cent, as well as education, up 5 per cent in a year.

Experts forecast another rate cut by mid-year.