The case for cash rate cut is growing, according to one financial analyst, and it could be cut as soon as today.
Peter Arnold, financial analyst at RateCity, says that global and domestic economic indicators suggest that the odds for a rate cut are very likely.
“With the events of the past fortnight – the economic situation in China and how that had fed into the Australian share market's mini crash – the chance of a cash rate cut has increased significantly.
“Whether the RBA
cuts [today] is very hard to say, while it looks like a cut is the likely outcome it's all about the timing. I think we'll get a cut this year and I'm betting on a cut by the time Melbourne Cup runs in November.”
Beyond the global economic pressures, a buoyant domestic housing market will influence the RBA board's rate decision today, says Arnold.
“While on one hand the lenders are looking to put the brakes on investor lending, the flipside of that is that owner-occupiers are being given hotter deals on home loan rates in some cases.
“What that means is that the RBA has less need to cut because owner-occupiers are getting better deals on home loan rates without the need for the RBA's prodding. But on the other hand, if the RBA board wants to cut the cash rate, they can do so safely because a cut is unlikely to be passed on by the lenders to investor borrowers.”
However, finder.com.au’s monthly Reserve Bank survey suggested the cash rate is most likely to remain on hold today. All but one economist in its panel of 32 economists and analysts expect the cash rate to remain on hold at 2% as we enter the first month of spring.
According to RateCity, a 25 basis point cash rate cut, if passed on in full by lenders, would see the average standard variable home loan rate fall from 4.81% to 4.56%. That would reduce monthly repayments by $45 on a $300,000 home loan repaid over 30 years.