Reserve Bank of Australia cuts rate further, are there more cuts to come?

By Navjeet Singh Matta, ASIC Licensed Mortgage Broker also Director- Gain Home Loans (Full member MFAA)

Dear Friends,

On 5th June the Reserve Bank of Australia (RBA) have further decreased interest rates by 0.25%. As you are all aware, last month they slashed the rates by 0.50% and most of the banks passed on the benefit (not in full) to the customers. It will be interesting to see what the lenders pass on. It has become a kind of trend now that the lenders do not pass on the full rate cut as announced by the RBA, as you all know that there are only four major lenders in Australia and therefore we have very little competition which means that we are all at the lender’s mercy when it comes down to the rate cut, there is no doubt that the funding costs have gone up after the global financial crisis however if you look at the profits made by the banks, I actually think that they should be passing on the full rate cut. Australian economy too has started to see some downtrend lately. The share markets all over the world have gone down in the last couple of weeks and our market has reacted to the same and that is why I presume that the Reserve Bank made this move. Australian shares hit a six month low at close of business on 4th June, wiping approximately $23 billion from the share market.This teamed with the recent drop in national house prices, forced the Reserve Bank to cut the cash rate 25 basis points to 3.50 percent. A representative from RP Data has commented- “Our latest index data showed capital city home values fell by 1.4 per cent over the month of May which is a factor the Reserve Bank would have been conscious of when deliberating their interest rate setting,” “Such a significant fall over a single month was unexpected considering the cash rate was slashed by 50 basis points in the same month. Not only did home values fall further in May, but we also saw consumer sentiment remain fairly steady suggesting the May rate cut has had little effect in stimulating consumer confidence and spending. The rate cut today will provide a further boost to housing affordability, which the RBA has recently suggested is back around levels not seen since 2002. The big question now is how much of the rate cut will be passed on by the banks privately and whether this will be enough to provide a shot in the arm for the housing market. If you want to keep abreast with the information, please subscribe to our free news-letter by logging on to our web-site www.gainhomeloans.com.au and enter your details there alternatively you can always reach me on 02 9676 3417.

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Contact us to discuss your situation. As we deal with all the lenders, it becomes very easy for you to compare different loans from different lenders. The last thing you want is to hop from one bank to the other trying to understand the products, features and interest rates and more over wasting your valuable time. We make it very easy for you to get the best product to suit your situation and can provide service at your home or at our office, which ever suits you. Our services are absolutely free. We may even get you some fees or charges waived from the bank. But that is not the only reason people choose us, we look after your financial needs from the time of the application, to the settlement and for the life of the loan. We have a regular news-letter that goes out to all our clients which is full of information about property and finance market. You might have noticed that the lenders these days have started offering better rates on home loans. If you recall during the GFC the cost of funds for the banks went up high and they started increasing rates out of RBA interest rate cycle. The information what we are getting lately is that cost of funds to the banks have gone down and now they are in a position to give more discounts to the customers. This is where we as mortgage brokers can assist you to pressurize the bank to reduce your rates further and save you good amount of money on your mortgage. We are in a position to bargain on a collective scale because if the banks do not listen, they lose considerable amount of business which can go to their competitor. I have been doing my bit by sending requests on my clients’ behalf and in most of the cases getting them a better rate. If you want to find out whether you are eligible for a better interest rate than what you have now, please give us a call, we will negotiate with the banks on your behalf and will do our best to get you the best rate and the product, our services are absolutely free

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