Reserve Bank leaves cash rate unchanged

Borrowers around the nation breathed a heavy sigh of relief this afternoon, the Reserve Bank board announcing that they have left the official cash rate unchanged at 4.5% after its meeting today. The RBA had raised the official interest rate six times since last October, and in doing so overseeing the rate rise from the historic recession-driven lows of 3 per cent to the 'average level' of 4.5% we see today. This breather comes as no surprise to the market, with pundits almost unanimous in predicting today's outcome beforehand. Indeed, some experts predict that this may be just the beginning of a lengthy pause in rate hikes.

One of the chief reasons cited for the rate being maintained include the continued loss of confidence in the eurozone economies, particularly in Greece's ability to stick to the financial measures outlined in the bailout plan and in the effects in the region if Greece fails to stay afloat. On the domestic front, housing as been a key factor in the decision. Price growth has shrunk to marginal levels, supply is increasing and this combined with the withdrawal of government concessions and increased housing interest rates has seen what CommSec labeled a "perfect storm" abate for the time being.

Take a Look Around

This respite gives borrowers the perfect opportunity to evaluate their situation and see if switching or refinancing is a viable option. The benefits to borrowers of switching could be significant. 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.

The recent rate rises have been a boom time for savers and those with money on hand. Now is a perfect time scope out some of the great deals on offer, with rates as high as 6.4% on savings accounts and 6.55% for a fixed one year deposit.

As for the Banks?

Banks have been scared to go as much as a basis point above the reserve bank's decision in recent months, most likely driven by the fear of another public relations relations backlash suffered by Westpac in December. 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.

Try Mozo's free online rate change calculator.

Compare home loans from all the major lenders

Compare savings accounts from all the major lenders

Compare term deposits from all the major lenders

Health check your home loan

Read our May Reserve Bank interest rates update