Banks to Pay Less for Home Loan Cash

Posted on March 21st, 2013 · Posted in News

The prospect of the big banks cutting mortgage rates out-of-cycle in the coming months has been heightened after the Reserve Bank said global funding pressures were easing, making it cheaper for banks to raise funds.  The RBA yesterday said there was scope to cut the official cash rate further if needed but is confident the economy is already responding to its recent cycle of cuts.

In a surprise move, RBA deputy governor Philip Lowe said the high Australian dollar has also been a positive for the whole economy as it has stopped overheating and kept interest rates low. Overall, the central bank is upbeat the Australian economy is in a good spot despite the more cautious approach of the household sector, which has also seen national savings levels jump $90 billion more a year than in the mid-2000s, hurting retailers.

After leaving rates on hold at 3% for the second consecutive month, the RBA’s minutes for the March meeting said the housing sector was picking up, retail conditions had improved and unemployment was subdued, pointing to below trend GDP growth in 2013 before a pick-up in 2014.

“But funding conditions for banks remained as favourable as they have been for some months,” the RBA said.

The futures market is showing only a 15% chance of a rate cut next month but has fully priced in one more RBA reduction to 2.75% cent in this cycle for October.

Analysts said after nearly two years of downward movement fixed interest rate home loans may have bottomed out.

Now may be a good time to consider fixing your interest rates, talk to today for a free finance review.