Borrowers not holding their breath for February rate cut

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Most Australian home owners don’t expect the RBA to cut interest rates at its first 2013 meeting on Tuesday, a national survey has found.

The poll by mortgage broker Loan Market, which asked respondents ‘What action do you think the RBA is going to take at its December meeting?’ found 55% of anticipate the current cash rate to be maintained at 3%.

Loan Market corporate spokesman, Paul Smith, says 35% of the 452 online respondents tipped the RBA to lower the official rate by 25 basis points, while 9% thought they would cut by as much as half a percentage point – which would take Australia’s cash rate to an all-time low of 2.50%. Just 1% predicted a rise in the official cash rate.

“It’s very likely the RBA will apply the same wait-and-see approach it demonstrated throughout 2012 at its meeting next week. Most economic indicators are within targeted ranges and it appears home owners aren’t convinced the RBA has enough evidence to lower interest rates.”

Smith says the December rate cut helped inject confidence into areas of the economy and helped spending and consumption over the holiday period, but says that, like most interest rate movements, it takes time to assess the full impact as more data becomes available.

He says the survey results could indicate that households do not expect the economy to grow on the heels of RBA rate cuts alone.

“Households have seen four rate cuts in the past year yet housing finance remains flat and sentiment remains quite cautious. If the government is looking to promote confidence in the economy it should look to ease concerns about the two-speed economy or home building.”

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