Archive for the ‘Interest rate’ Category
Friday, May 18th, 2012
Consumer sentiment is flat, despite a 50 basis point cut from the Reserve Bank. The Westpac Melbourne Institute Index of Consumer Sentiment increased by 0.8 per cent in May from 94.5 in April. Westpac’s Chief Economist, Bill Evans, said the results were surprisingly low and fell well below expectations. Its is a disappointing result. It follows a surprise 0.5 per cent cut in the official cash rate by the Reserve Bank and extensive media coverage that the unemployment rate had fallen from 5.2 per cent to 4.9 per cent.
However, other factors appear to have offset these positives. Firstly there might have been a degree of disappointment amongst households that the standard variable mortgage rate was reduced by an average of 0.37 per cent. The results show that sentiment is two per cent lower now, than when the cash rate was, 100 basis points higher last October at 4.75 per cent.
The lower than expected sentiment could give the Reserve Bank reason to cut the cash rate again in the coming months. Westpac’s current view that the Bank will wait until July before it cuts again but developments overseas along with today’s evidence that the recent cut has had little impact on Confidence could easily see the Bank bring that decision forward to the next Board meeting in June.
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Wednesday, May 9th, 2012
As more lenders continue to move on rates, one thing is becoming very clear: no lender is prepared to pass on the full rate cut to borrowers. In the last few days, BankSA cut 38 basis points from its standard variable rate to 7.04 per cent, while St George also cut 0.38 per cent from its SVR, taking it to to 7.04 per cent effective from May 14. Bendigo Bank cut its rate by 0.35 per cent and CUA passed on half of the Reserve Bank’s 50 basis point cut by slashing 25 basis points from its standard variable rate. One of the biggest interest rate cuts so far is the Bank of Melbourne, which passed on a 0.41 per cent rate cut to borrowers.
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Tuesday, May 8th, 2012
The Reserve Bank is expected to cut the official cash rate by a further 75 basis points before the end of the year, after new research revealed job advertisements slumped yet again. According to the latest ANZ Job Advertisement Series, the number of job advertisements on the internet and in newspapers fell 3.1 per cent in April. Overall advertisements are now approximately 1.7 per cent below the level of April 2011.
Sustained uncertainty by consumers and businesses and an expectation that fiscal policy will subtract from growth in the year ahead as the Government returns the budget to surplus in 2012/13, has forced ANZ to forecast further 0.75 per cent drop in official interest rates by the end of 2012. In addition, expect to see the unemployment rate rise slightly to 5.3 per cent this month.
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Wednesday, May 2nd, 2012
Australia’s major banks are unlikely to pass on the full 50 basis point rate cut to borrowers. Yesterday, the Reserve Bank cut the cash rate by 50 basis points to 3.75 per cent the biggest drop since the peak of the Global Financial Crisis and the lowest level since December 2009.
Within hours of yesterday’s announcement The Bank of Queensland confirmed that it would pass on 35 basis points of the rate cut to its borrowers.However, at close of business yesterday, all of the majors were yet to make announcements around their mortgage rates.
I expect the big banks to follow the lead of BoQ and hold back some of the rate reduction. This is a very big move from the Reserve Bank and it will help thousands of households, with people on a $300,000 mortgage potentially saving around $1,000 per year.
But it’s unlikely that all lenders will pass on the full 50 basis point rate cut. The signals from the big four banks suggest that they will try to hold on to part of this rate cut, remember that of the 50 basis point cash rate reduction from the RBA since November, the big four banks have only passed on around 40 basis points to variable rate home loan customers.
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Tuesday, May 1st, 2012
The Reserve Bank of Australia (RBA) has cut the official cash rate in its May Board meeting today, following weaker than expected inflation data. The Board thought it was prudent to cut the official cash rate 50 basis points to 3.75 per cent, after headline inflation turned out to be significantly lower than the RBA’s target range of 2 to 3 per cent.
The rate cut failed to shock industry analysts, with many forecasting a rate cut last week. The RBA’s decision was the right one, as the economy was in serious need of a boost. We have seen a lot of softness in the economy of late. House prices are down on where they were, retail activity has slumped and headline inflation was just 1.6 per cent for the year. There is no doubt the economy is doing it tough at the moment and hopefully this rate cut will help ignite consumer spending once again.
Minutes from the meeting today show the RBA took inflation results onboard was making the rate cut decision. Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over two per cent over the latest four quarters.
In considering the appropriate size of adjustment to the cash rate at today’s meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.
With the RBA slashing rates, all eyes will now be on Australia’s lenders to see if they pass on the full rate cut to borrowers.
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Tuesday, May 1st, 2012
Westpac’s decision to increase its standard variable rate discount could be a sign that the lender expects the Reserve Bank to cut rates at today’s Board meeting. Yesterday, Westpac announced it would increase its standard variable discount to 0.70 percentage points from 0.40 per cent to home loans from $150,000 on the same day the Reserve Bank meets to decide on changing the official cash rate.
Westpac has jumped the gun and announced fixed rate reductions and a variable rate discount before the Reserve Bank meeting. It seems like Westpac are betting on the RBA to drop the official cash rate. It also gives some cover for Westpac to pass on less than the full cash rate reduction, by pointing to these discounts and fixed rate cuts.
Lenders are getting more creative when it comes to offering discounts and incentives for home loans. But borrowers need to remember that big discounts don’t mean you are getting the best home loan deal. We’re in a new lending environment where many lenders are moving their interest rates independently of the RBA, whether it’s by not passing on the full rate cuts to their customers or creeping their rates up slowly every few weeks.
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Thursday, April 26th, 2012
The Reserve Bank of Australia is all but certain to cut rates in May, with new CPI data weaker than expected. CPI rose by 0.1 per cent in the March quarter of 2012.
The Housing Industry Association said the CPI result was weak enough to warrant a 50 basis point rate cut at next week’s Board meeting. The wider Australian economy needs a further 75 basis points of interest rate cuts and there is nothing standing in the way of a 50 basis point move to get the ball rolling next Tuesday.
50 points would be a bold move for the RBA, but it would be entirely appropriate given the pulse of the Australian economy.
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Thursday, April 19th, 2012
ABS figures released today confirm a very weak quarter for new housing in December 2011. New residential building work fell by 1.7 per cent in the December 2011 quarter to be down by 7.7 per cent when compared to the year before. Meanwhile, the value of major alterations and additions work done, which accounts for around 20 per cent of total renovations activity, fell by 2.1 per cent over the quarter. The overall value of work done in total over the 2011 calendar year was down by almost 10 per cent.
Things are just getting worse for both new housing and major alterations and additions activity. In the December 2011 quarter, seasonally adjusted residential building work done fell for a third consecutive period, declining by 1.8 per cent to an annualised level of $44.5 billion.
The situation is very clear – interest rates are too high, the short term focus on a return to budget surplus badly timed, and housing policy reform
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Wednesday, April 18th, 2012
More than 40 per cent of Australians believe 2012 is the best time to purchase a residential property. According to QBE LMI’s latest mortgage report more than 60 per cent of Australians intend to buy property in the next three to five years. These survey results prove there is still a good appetite for residential property.
Despite the ongoing global uncertainty and lower sentiment among borrowers, Australians intend to continue purchasing properties and 55 per cent believe it is important to get into the market now, rather than later. The interest rate cuts at the end of last year have helped promote residential property and encourage first home buyers to jump into the market as quickly as possible. It is more important to get into the market now than wait and save for a bigger deposit.
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Tuesday, April 10th, 2012
Pressure is mounting on the Reserve Bank of Australia (RBA) to cut the cash rate in May after unexpected hurdles slow the nation’s growth. The increasing cost of living may spark the RBA to drop rates, with average petrol prices over the long-weekend over $1.50 according to the Australian Institute of Petroleum.
The latest RP Data statistics also show a flat market with house prices, with no improvement seen over the first quarter of the year. Poor results are expected in the housing finance and employment results which will be released by the Australian Bureau of Statistics later this week.
International news is also making its mark on Australia with a slowing growth rate in China also causing damage at home. Spain conceded its debts will balloon this year to their highest level for two decades. The Spanish government announced that the debt-to-GDP ratio will leap to 79.8 per cent in 2012 from 68.5 per cent last year.
Also, news of tension between the US and China over the holiday may cause the Australian market to suffer according to the Australian Financial Review, despite the US government playing down the fears of confrontation.The industry will be keeping a close eye on the release of vital indicators in the coming week including consumer sentiment, employment figures and housing finance.
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