As RBA eases off the brakes, non-bank lender MoneyMe picks up momentum

The RBA has cut rates again and it’s good news for both borrowers and non-bank lenders.

As RBA eases, non-bank lenders pick up momentum. Image: Getty.

• RBA cuts again as inflation chills

• Cheaper funding gives non-banks a competitive edge

• MONEYME moves fast to lower rates

Special Report: The RBA has cut rates again and it’s good news for both borrowers and non-bank lenders.

After delivering one cut back in February, the RBA has just followed up with another. On Tuesday, it trimmed the cash rate by 25 basis points to 3.85%.

It’s the lowest rate we’ve seen since mid-2023 and a sign the central bank reckons inflation is cooling enough to take its boot off the economy’s neck.

“In the Board’s judgement, inflation is now in the target band,” the RBA said in Tuesday’s post-meeting statement.

They also noted that “the risks to inflation have become more balanced”. It's central bank speak for: we’re not panicking anymore, but let’s not get ahead of ourselves.

Governor Michele Bullock made it clear the bank's staying cautious.

She flagged the possibility of more cuts if needed, but said the board leaned towards a smaller move this time.

Bullock said she and the board considered a jumbo 50bps drop, but a “measured” cut made more sense right now given the outlook.

The majors dropped rates

No sooner had the RBA dropped the rate than the big banks started following suit.

National Australia Bank (ASX:NAB), Australia and New Zealand Banking Group (ASX:ANZ), Commonwealth Bank (ASX:CBA) and Westpac (ASX:WBC) all announced cuts to their variable rates on Tuesday afternoon.

It's a rare show of efficiency in the land of the majors.

With market share to protect and strong pressure to provide borrowers with some relief, the banks know they can’t afford to sit still.

For mortgage holders, it means a bit of breathing room.

For savers, probably less so. Term deposit rates have already started coming down.

And for non-bank lenders? Well, this is where it gets interesting.

Why non-banks love a rate cut

Unlike the big four, non-bank lenders don’t have access to cheap bank deposits to fund loans.

They rely on wholesale funding, which is directly influenced by the RBA cash rate. So, when rates drop, their funding gets cheaper.

And cheaper funding is a green light to sharpen rates, compete harder and win more customers. When funding costs fall, they can pass those savings on to customers.

Non-bank lender MONEYME (ASX:MME), for instance, didn’t waste any time.

On Tuesday, the lender told the market it would pass the full 25bps onto its personal loan and Autopay car loan customers.

With around 70% of its loan book on variable rates, most of its customers stand to benefit.

“Today’s cash rate cut is welcome news for Australian borrowers, who’ve weathered a prolonged period of high interest rates,” said MoneyMe’s CEO Clayton Howes.

"A falling rate environment not only eases pressure on households, but also supports the momentum of the non-bank lending sector."

Howes added that a lower cash rate reduces MME's cost of funds and strengthens its ability to deliver better pricing and make credit more accessible.

"As with the last rate cut, we’ll be passing this one on to our customers – a key advantage of our variable rate offering that ensures customers benefit in real time.”

This is not the first time MoneyMe has moved quickly on rates.

When the RBA cut rates back in February, it passed on the full reduction to customers and lowered headline rates to sharpen its competitive position and drive growth.

More rate cuts to come?

Markets now expect at least two more rate cuts this year, with traders pricing in another 65bps of easing by December.

That could see the cash rate fall to 3.2%, though the RBA’s made it clear they’re not locking in a path.

It’s a data-watching game from here: inflation, wages, consumer spending, and whatever curveballs come from abroad.

But for now, the message is clear: the cycle has turned.

For non-banks like MoneyMe, this is great news: cheaper funding, and the chance to prove that when the RBA shifts gears, they’re already in the fast lane.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.