RBA sets the bar in interest rate limbo

The Reserve Bank of Australia (RBA) has set the bar for interest rates further into historic territory with the decision to lower the cash rate to an even three per cent.

Announcing this month’s decision, RBA chief Glenn Stevens said that although home loan interest rates had shot down in recent months, the Bank believed there was still room for a "modest" reduction of 25 basis points.

In past months, banks have been quick to announce their commitment to the cut with the news that they will be bringing new low-interest home loans on to the market, to the delight of variable rate customers and first-home buyers.

However, it seems that the RBA is beginning to test the nerve of Australia’s major banks with its latest cut, with NAB flatly refusing to reduce the interest rate on its home loans.

The news came just an hour after Commonwealth said it would only be shaving ten basis points off its home loan rates.

News.com.au warns that there is no guarantee that the other major banks will follow up on the cut.

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