Monday, 4 March 2013

Rates on hold as the banks make cuts to stimulate lending

The Reserve Bank of Australia surprised no one today by keeping the official cash rate on hold at three per cent.

It’s not all bad news for people trying to enter the housing market with increased competition amongst the banks driving lending rates down.

Over the past month, the Home Loan Centre has witnessed a reduction in variable lending rates while some institutions have cut their fixed rate to less than five per cent for between one to three years.

Home loan growth is the slowest in three decades with the December quarter showing just 0.3 per cent growth in the number of people taking out mortgages.

Insiders say it is this lack of growth that’s prompting banks to consider further chopping rates irrespective of the RBA’s latest decision.

Furthermore, the TD Securities – Melbourne Institute Monthly Inflation Gauge remained flat in February, following small rises in January and December.

In the 12 months to February, the Inflation Gauge increased by 2.4 per cent on the back of price rises for fruit and vegetables, automotive fuel and tobacco, though these were offset by falls in holiday travel and accommodation, clothing and footwear.

This tame level of inflation remains well within the RBA’s two to three per cent target range.

For the RBA’s official interest rates statement visit