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The Reserve Bank has left the official cash rate unchanged for the second month running, an extended rate pause sure to bring a smile to the faces of borrowers across the country. Various opinions on the Reserve Bank's move were being bantered about the nation's newspaper columns in the days leading up to today's announcement. The Australian declared that the rate cut was "odds on", whilst the Herald Sun sat on the fence saying the RBA could move up or down. Fairfax Digital offered a countering opinion suggesting the current climate would only delay rate rises till perhaps the end of the year.
Leaving the cash rate unchanged is a logical decision that highlights the balancing act the Reserve Bank has to play when the official cash rate decision is made. On one hand, governor Glenn Stevens had to contend with inflation being at the upper end of the target range as well as solid growth in Asia and Latin America. On the other hand, the ongoing volatility and uncertainty in European markets amid the European sovereign debt crisis continues to loom as a handbrake to the global economic recovery. With both opposing forces in mind, the Reserve Bank has decided to play it safe and keep the rate steady at 4.5%.
As we said last month, this extended break is an ideal opportunity for borrowers to evaluate their situation and see if switching or refinancing their home loan is a viable option. Using our own home loan tools we've determined that switching from a mortgage with a 'Big Four' lender to that of another provider with an interest rate as much as 70 basis points lower, for a $250,000 loan over 25 years, would mean savings of roughly $100 per month and total savings of over $34000 over the loan term. As always, you should also take switching costs into account when making any such decision.
Banks have towed the line and haven't ventured outside the reserve bank's decision in recent months. However, we all know the funding pressures the banks face and the increased volatility in overseas credit markets may be having an effect. Either way, our team of rate chasers will be on the case, scouring the landscape for any sneaky rate rises as they happen, so be sure to keep on checking mozo.com.au for any movements.
Try Mozo's free online rate change calculator.
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Australian treasurer Wayne Swan has warned the country's major banks that they risk alienating their customers if they hike interest rates.
The Reserve Bank of Australia (RBA) surprised many economists earlier this week when it opted not to lower the base rate to four per cent and now there are fears that some of the main lenders will see this as an opportunity to increase their own rates.
Experts have predicted that ANZ, Commonwealth Bank, Westpac and NAB may all make a readjustment before the RBA board members meet again in March.
Mr Swan has urged Aussies not to be bullied by the big four and has insisted that savings can be made by comparing bank accounts and other packages.
"The reforms we've put in place make it easier for families to ditch their bank if it doesn't do the right thing by them," he commented.
Last week, the Australian Associated Press conducted a survey, which found that 13 out of 14 economists believed the RBA would cut interest rates by 0.25 per cent in February.
The Reserve Bank of Australia (RBA) has surprised analysts by maintaining the base rate at 4.25 per cent.
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