Macquarie has jumped the gun to reduce its rates ahead of the Reserve Bank cutting the fixed rate home loan by 0.16%. This move can be seen as either a big call that a central bank cut is coming in mid-February or it’s a publicity play by the country’s biggest lender to let everyone know that Macquarie is into home loan lending in a big way.

I’m a big fan of Macquarie. I’ve been involved with this bank since its beginning. It’s a big holding in my self-managed super fund. But there are some important lessons to know when it comes to a rate cut like this from a bank. Here they are:

1. It’s only a 0.16% rate cut. When the RBA cuts, it will be by at least 0.25%.
2. When the RBA cuts, it usually does two or three in a row.
3. Macquarie is cutting its one-year fixed rate to 5.55%, which means you’ll be locked in when the variable rate could drop two or three times.
4. The best time to lock into fixed rates is when rates are low, not high.
5. To get the one-year fixed rate of 5.55% for owner-occupiers paying principal and interest assumes they have at least a 30% deposit.

The best news from this bold and smart play by Macquarie is that their economics team might think a February rate cut is becoming a bigger chance of happening.

Before confidence in a cut can be raised anymore, we need to see a good Consumer Price Index (CPI) data drop next Wednesday. Remember, the headline CPI is in the 2-3% band already but the RBA wants the core inflation rate (this is the less volatile and more reliable measure of what prices are doing) in that 2-3% band.

That means it might be wise for those liking the Macquarie offering to wait until next Wednesday because if the number is on the low side, other banks will be out trying to get your business with lower fixed rates.

If it’s a disappointing number next week, the first cut mightn’t come until May, though I can’t help but think that the Governor of the Reserve Bank has had a few phone calls from friends of the Government about how a rate cut is way overdue.

Of course, a rate cut in mid-February, when the RBA board meets, could make an early election a real possibility.

By the way, Macquarie has also announced its two and three-year fixed rates are down 0.14% to 5.55%. Once again, locking in now for two or three years could be unwise given the history of RBA rate cuts.