Loan Market has called for more rate cuts in the wake of the RBA’s first move in a year.
While the company welcomed the Reserve Bank’s Melbourne Cup Day move to drop the official cash rate to 4.5%, Loan Market chief operating officer Dean Rushton urged further cuts by the Central Bank, claiming they would be needed to boost a struggling economy. Rushton said housing finance could be further stimulated by deeper cuts to the official cash rate.
“In 2008, when the RBA rapidly dropped rates by 4.25% over several months, we saw demand for finance commitments had increased by 32%. However in late 2009 when the cash rate began to rise from 3.0% up to a high of 4.75%, there was an historic drop in the market,” Rushton said.
Rushton claimed consumers remained wary of the economic outlook. He said systemic economic issues would not be addressed by a single cut in rates.
“A recent survey we ran showed that the issues occurring in Europe were top of mind for consumers when considering their financial position. These issues are not going away short term and there will be more work to do to stimulate sectors of our economy,” he commented.
Loan Market also pointed to continued hesitance by consumers to enter the housing market. Though the market has seen signs of returning demand, Rushton said buyer activity is still well below its pre-GFC levels.
“It’s certainly discouraging to see the number of people obtaining financing fall below levels we saw in the early 2000s when we’ve experienced significant population growth and property development over the past decade,” he said.
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