Home owners predict this week's RBA decision

by AB02 Apr 2013

Most Australian home owners expect the RBA to leave interest rates on hold for a fourth consecutive month, according to national survey results – and economists largely agree.

A recent poll conducted by aggregator Loan Market asked what action borrowers expected the RBA to take at its meeting today and found 57% anticipate the current cash rate to be maintained at 3%.

Loan Market spokesperson, Paul Smith, says 40% of the 382 online respondents tipped the RBA to lower the official rate by 25 basis point and only a ‘handful’ thought they would lower rates more than 50 bps. Nobody predicted that rates would be raised.

“Improvements in the economy are aiding in the return of confidence to the property and finance markets. With improvements in housing affordability and historically low interest rates, the real estate industry is really starting to gain some momentum.”

However, financial comparison website, RateCity, CEO Alex Parsons says that if the RBA does cut the cash rate, lenders will have ‘no excuse’ not to pass on the cuts in full to their variable home loan customers, after keeping on average about 0.40 percentage points from the past six rate cuts since November, 2011.

"Australia's home loan market has seen a game-changer this year, with six lenders cutting variable rates out-of-cycle," says Parsons. "It's the first time we've ever seen variable rates fall while the cash rate hasn't changed, which means the home loan market is a lot more unpredictable than it used to be.

Smith says that while it appears most home owners don’t expect a rate cut, they should continue to see strong competition between lenders, while variable interest rates could fall as cost-of-funding pressures ease for banks.

“Even with minimal rate movement, lenders are competing with each other on discounting, fees and product features.” 

The percentage of home owners who are predicting no movement in March was up from the same survey held for the February and March RBA meetings, where 53% and 55% respectively (correctly) predicted no movement.

“Clearly home owners are well aware of the likelihood of the RBA moving interest rates and are one of the most accurate sources of rate predictions.”

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