Article by Mozo
The Reserve Bank has kept the official cash rate steady at 4.25% for the second month in a row today.
Last month's no change, came as a big surprise to Aussie economists, who were almost certain of a rate cut. However, today's announcement comes as no big surprise, with most commentators predicting the cash rate to stay at its current level. Overall, there is more faith in the stability of Aussie economy, with low inflation, steady employment levels as well as the diminished threat of EU implosion.
Governor Glenn Stevens stated, "With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy remained appropriate for the moment."
Stevens also referenced the moderate expansion of the US economy and EU policy makers ensuring the European economy would not deteriorate as reasons for the decision.
What will the banks do next?
In February, the banks attempted to shake off the notion of RBA "control" (and possibly make some extra bucks), with 46 lenders increasing their variable home loan rates, ranging from 0.01% to 0.15%, despite the RBA not changing rates.
Will we see the same in March? The Mozo team will be on the case, reporting changes live as they happen.
High LVR's are back
During the GFC, high risk loans were kicked out the door in order to stabilise the Aussie economy. It seems as though the Aussie economy is reaching a level of security, with 95% LVR loans reappearing recently.
The jury is out on whether this is a good sign of securitisation, or a warning of a quick return to the bad old days.
To fix or not to fix?
With interest rates steady, a variable rate home loan may be a good choice. The UBank UHomeLoan tops the ranks with a 6.23% comparison rate, even after a 9 basis points increase in February. Have a play with Mozo's home loan comparison tool for a complete look at the home loan market.
Save away Aussies!
Term deposits currently offer fantastic fixed interest rates for 6 months to 1 year. The UBank Term Deposit Online offers a stand-out 5.95% interest rate for 6 months, compared to the UBank USaver which has a 6.01% variable rate (with an automatic savings plan in place). A short-term deposit could be a good play when you factor in the additional RBA cuts expected in 2012.
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