Sluggish sentiment twists RBA's hand

February 03, 2015
Jay Stewart

Reserve Bank of Australia cuts cash rate


The Reserve Bank of Australia has cut the cash rate for the first time in 18 months, taking the official rate to the historical low of 2.25 per cent.


At its Board meeting earlier today, the Reserve Bank announced it would cut 25 basis points off the already low official cash rate.


Last month’s disappointing consumer sentiment result combined with a recent spate of poor economic data ultimately forced the RBA to take action and cut the cash rate.


“According to the latest Westpac Melbourne Institute of Consumer Sentiment Index, confidence grew by just 2.4 per cent in January to 93.2, meaning pessimists still outnumber optimists by a significant majority,”


“The Index is still down by 9.7 per cent on a year ago and even with the recent increase, it is still only back at the levels recorded in the immediate aftermath of the Federal Budget.”


And it is not just consumer sentiment that is low at the moment. The latest Monthly Business Survey from National Australia Bank found business confidence is currently sitting well below long run averages.


“The survey showed both business confidence and business conditions are sluggish at the moment. Business conditions in particular eased for the second consecutive month, which suggests the economy is currently very patchy with little to no momentum building. With that said, it was largely unsurprising to see the Reserve Bank cut the official cash rate this month.”


This latest rate cut should encourage many of Australia’s lenders to follow suit and trim the interest on their suite of home loan products.


“If lenders do pass on the latest rate cut in full we could expect to see more and more potential home buyers jump onto the property ladder as they look to take advantage of the historically low rate environment,”


 “Indeed, with interest rates hovering at historical lows and the cost of borrowing more affordable than it has been in a very long time, now may be the right time to either get onto the property ladder or review your home loan.


“For those borrowers who are considering switching, it is important to take the time to compare all aspects of the loan from the rate to the fees and features to make sure you are getting a loan that is truly suited to your needs.”


If you want to learn more about your home loan options, call us on 5502 8906 or click on the 'Contact Us' tab at the top of the page 

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