INTEREST rates have fallen to 4.5 per cent, providing a massive boost for struggling households and the retail sector ahead of Christmas.
The Reserve Bank of Australia on Tuesday slashed rates by 25 basis points in a bid to boost consumer spending and turn around the depressed property market. Most of Australia’s biggest home lenders cut mortgage rates soon after the central bank reduced the cash rate for the first time since April 2009, and many of the country’s small lenders followed suit.
Westpac took just 15 minutes to pass on the Reserve Bank of Australia’s (RBA) 0.25 percentage point rate cut in full on Tuesday. It will lower its standard variable home loan rate (SVR) to 7.61 per cent from November 14.
Westpac is the nation’s second biggest mortgage lender by market share. Bank of Queensland (BOQ) and Commonwealth Bank (CBA), Australia’s biggest home lender, followed suit, cutting their SVR to 7.61 per cent and 7.56 per cent respectively. BOQ’s rate cut will take effect on November 11, and CBA’s on November 4. ANZ Banking Group and National Australia Bank (NAB) said their interest rates were under review.
Prime Minister Julia Gillard earlier warned the banks that they had “no excuse” if they failed to pass on a likely interest rate cut to customers. A fall in interest rates to 4.5 per cent has given homeowners a $600 reduction on annual mortgage repayments for a $300,000 loan.
New home sales have declined in September, with detached house sales falling to their lowest point in 11 years, according to the Housing Industry Association. A survey of Australia’s major residential builders showed a 3.5 per cent fall in the number of new homes sold in September, with a 14 per cent decrease in the September quarter.
Earlier at 11.41am: JULIA Gillard says banks have “no excuse” if they fail to pass on a likely interest rate cut to customers.
Economists have forecast a fall in interest rates to 4.5 per cent to be unveiled at 2.30pm, giving homeowners a $600 reduction on annual mortgage repayments for a $300,000 loan. The Prime Minister said Australians would be expecting relief if the Reserve Bank signals a change to the official cash rate this afternoon. “The Reserve Bank of course is independent from Government, so they’ll make the decision this afternoon,” Ms Gillard told 5AA radio.
“If the Reserve Bank determines to cut rates today, then I think Australian banking customers will look at their banks and say they’ve got no excuse for not passing that cut on. “I don’t believe that the banks would have any excuse for not passing the rate cut on, in full, if a rate cut occurs today.” NAB chief economist Alan Oster said a 25 basis point rate cut today was still “odds-on”, with the market pushing the Australian dollar back from its six-week high of $US1.07. Ahead of the expected rate cut, the Aussie dollar was trading down US2c at $US1.05 late yesterday with the market pricing in the prospect of a rate cut an 85 per cent chance.
More than two-thirds of the country’s top economists are tipping a rate cut, with a small minority forecasting the RBA will stay on hold as it tries to balance out the competing pressures in the economy. It comes as the latest RP Data-Rismark figures shows another 0.3 per cent was shaved off Melbourne property values in September. The data shows the city’s house prices have tumbled 5.3 per cent this year in what RP Data described as a “controlled correction” to a four-year property boom.
But the figures also show the national house price slump is starting to ease and a rate reduction could kick-start a recovery. Yellow Brick Road executive chairman Mark Bouris is calling on the big banks to immediately cut lending rates in line with any RBA move to give consumers back some confidence. “It has taken six months but it is our hope that on Melbourne Cup Day the RBA will finally listen to the people’s plea,” he said.
The big four banks have refused to guarantee they will pass on any cut in rates. The Australian Retailers Association yesterday added its support for a rate reduction, claiming it is needed to save the key Christmas trading period. The association’s executive director, Russell Zimmerman, said there was evidence of a lack of confidence, with more than 40 per cent of retailers believing any economic recovery was 18 months away.
– with Matt Johnston
Source: The Courier-Mail
