Buyers want more rate action, but RBA set to stay put

by Adam Smith21 Jun 2012

Home loan enquiries have seen spikes immediately following recent bank rate cuts, but ongoing consumer wariness means the activity hasn't been sustained.

Mortgage broker Loan Market has said consumers still want more action from the Reserve Bank, in spite of back-to-back cuts in May and June. A spokesman for the company said consumers remained wary of the economic environment.

"Consumers are still hesitant despite the RBA's cuts, which have not been passed on in full by most lenders," the spokesman said.

The Loan Market spokesman said the company has seen "spikes in activity", but no sustained rises in enquiries.

"Our own enquiries have risen by only about five per cent with most activity on the days when lenders made their interest rate announcements, but any spikes in activity haven’t been sustained and the signs are that consumers are uncertain about the European debt crisis and the direction of the domestic economy and they are hoping for more rate cuts," he said.

But consumers looking for further action from the Reserve Bank may find themselves disappointed. Minutes from the RBA's June meeting revealed the Bank's decision to cut the cash rate by 25bps was an each-way call.

"The arguments were finely balanced. Recent domestic data generally had not suggested a significant weakening in conditions compared with the forecasts a month earlier. Moreover, there had not been time to assess the effects of the earlier reductions in the cash rate," the Bank said.

The RBA hinted that further cuts may not be forthcoming, saying that the June cut would provide "a measure of stimulus that would be expected to flow through to the domestic economy over the coming months".