Why You Don’t Feel Rate Cuts at All, Even When They’re Announced
The news is making a big fuss about rate cuts, but my loan interest rate is exactly the same.
When I looked into why, the base rate, market rates, and banks’ markup are all completely different things. Even when the base rate falls, actual loan rates often lag or don’t move at all depending on funding costs and net interest margin conditions.
In the end, I learned that the riskiest thing is to just look at news headlines and think, 'It should get a little better now.' Whether it’s a variable or fixed rate, the answer is to check your own terms directly.
7 answers
Facts... The news and my bank account always seem to live in different worlds.
I really relate to this. Last year, when they said rates were going down, I looked into refinancing my loan, but there wasn't even a 0.1% difference from my existing rate, so I just gave up lol. What I felt then was that banks' markup rates are whatever they want them to be. I realized how pointless it is to only stare at the base rate. In the end, you have to go around to multiple banks and weigh your credit score and collateral terms. It's easier on your mind to think of news coverage as advertising.
But we need to think about this a bit in reverse: when the base rate goes down, people taking out new loans or refinancing definitely feel it. Existing borrowers just see it reflected later. Most of the people saying it doesn’t feel like anything have already fixed their loans or are with non-bank lenders that have high funding costs. Isn’t it a bit much to conclude that nothing moves no matter what?
Do you have a source? Where did you see the discussion about funding costs and net interest margins?
For people who switched to a fixed rate, a rate cut actually stings... if they’d been on a variable rate, their interest would have gone down.
The real answer is getting into the habit of opening your banking app and checking your actual interest rate. News is about other people, and my own terms are the truth anyway, so yeah.