Australian interest rate remains unchanged

Posted on May 5, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , , , ,

The Reserve Bank of Australia held it’s monthly meeting today and decided to freeze interest rates, leaving the official cash rate unchanged at 3.00%.

The RBA said confidence remained fragile but there were some signs economies around the world were stabilising.

RBA governor Glenn Stevens said Australia’s economy was poised to benefit from the significant cuts to interest rates made so far, combined with the Federal Government’s fiscal stimulus. “Market and mortgage rates are at very low levels by historical standards and business loan rates are below average, reducing debt-servicing burdens considerably,” he said.

“Much of the effect of these changes is yet to be observed. “The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead.”

Domain spokesman, Anthony Ishac commented, “The official cash rate remains unchanged at the current level in response to signs of a stabilising world economy. However, the RBA remains vigilant, maintaining enough scope on rates to manoeuvre in anticipation of forecast rising unemployment later in the year. Any future action will also need to factor the reluctance of the major banks to pass on rate cuts in full to mortgage holders”.

Most economists had not expected interest rates to come down again.

“In pondering the cash rate level … the RBA board will likely be persuaded by both international and local developments since the April decision to leave the cash rate unchanged,” said HSBC chief economist John Edwards yesterday.

“The downturn in China has been arrested. In a number of other major economies, including the US and Japan, the rate of deterioration is slowing.”

Earlier today, building approvals posted a stronger-than-expected 3.5 per cent jump for March above the market expectations of a 2.3 per cent rise.

Economists said the building sector could be recovering.

“It had been expected for some time that the tight rental market, low interest rates and soaring population growth would translate to stronger building activity, and it now appears to be taking hold albeit from a very depressed level,” said Commsec chief economist Craig James.

“It is important to remember that it does take awhile to for approvals to follow the improvement in economic conditions.”

Are property sales building momentum?

Posted on April 17, 2009 by peter 
Filed under Australia Real Estate News · Tagged: , , ,

Well, what do you know – there’s life in the property market again. After years of Australia languishing in the doldrums, the heady combination of falling prices, record low interest rates and generous financial incentives to take the first step onto the property ladder are enticing buyers in droves. In fact, attend a Saturday morning showing for a property in the first-home buyers’ domain of $600,000 or less and you could be forgiven for thinking the boom is back.

So should you join the throngs at the auctions? The external factors are certainly appealing. Interest rates are at 45-year lows and tipped to fall further yet. This means it’s now at least $800 a month cheaper to pay off and own a $400,000 property. What’s more, nowadays $400,000 probably gets you a bit more.

Nationally, prices have fallen by just under 3 per cent in the past year, RP Data states. And you may get a particularly good deal in Perth and along the eastern seaboard at the moment.

Then there’s the enhanced first-home buyers’ grants. Until June 30, the base grant of $7800 has been doubled to $14,000 for buying an existing property and tripled to $21,000 for new ones. This assistance provides significant impetus to get in now – and let’s hope the success of this stimulus measure will persuade the government to extend it.

Meanwhile, the situation for prospective investors is also better than it’s been in years. Thanks to the steady rent increases generated by a dearth of properties in recent times, along with the price stagnation, yields are looking attractive again. In fact, positively geared properties ? so long the Holy Grail of investors ? are a real possibility.

Just remember that whatever is going on in the broader market, the time to buy is when you are ready, not before. Ensure you have a decent deposit, you borrow an amount you can service with no more than one-third of your before-tax income and that you can cope with rapid interest rate rises. After all, we’ve seen recently how fast things can turn.
Happy hunting,

Interest rate cut not passed on in full by the big 4 banks

Posted on April 8, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , ,

Australia: Following the reserve banks decision to cut the cash rate by25 basis points (0.25%) yesterday, the big 4 banks of Australia have decided not to pass on the full rate cut to borrowers – a decision which has angered federal and state governments, not to mention, consumers.

Westpac, along with the ANZ, has cut its standard variable home loan rate by 10 basis points (0.10%), in line with a similar move by the Commonwealth Bank of Australia.

interest_rateWestpac is the last of the Big Four banks to respond to the Reserve Bank’s rate reduction yesterday.

National Australia Bank, stands alone out of the big 4, with it’s decision to not pass on any of the cut to it’s borrowers – leaving its standard variable home loan rate unchanged.

From April 20th, Westpac will charge 5.81% on their standard variable loan. ANZ will have the same rate, effective from April 17.

”Westpac continues to manage the challenging funding conditions with careful consideration of the deteriorating economic environment and the impact on our customers,” Westpac Group Executive, Retail and Business Banking, Peter Hanlon said.

Yesterday, CBA said it would cut its standard variable mortgage rate by 10 basis points to 5.64%, effective April 17.

National Australian Bank has said it would not cut rates because of the high cost of wholesale funding. Its variable rate stays at 5.74%.

The big four have resisted calls from Treasurer Wayne Swan for them to pass the 25 basis-point cut on to customers. Banks that don’t pass on the interest rate cut need “a good kick up the bum”, according to Federal Treasurer – Wayne Swan.

Victoria State Premier John Brumby added his voice to calls for the big banks to pass on cuts in interest rates to borrowers today, saying, “The banks need to do this, there needs to be more competition in the market, and I’m quite disappointed these reductions haven’t been passed on,”.

Prime Minister Kevin Rudd also urged banks to reconsider their decisions.

Moving the lending rate from 5.91% to 5.81% knocks $21 off the average monthly repayment on a $350,000 mortgage over 25 years.