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RBA may cut rates further: industry

| 02.06,09. 04:24 PM |

RBA may cut rates further: industry

June 2, 2009 - 3:54PM


Housing industry participants say the Reserve Bank of Australia (RBA) may cut the interest rates in the months ahead and that borrowers should take advantage of the low rate environment to pay back as much debt as possible.

The RBA on Tuesday kept the overnight cash rate unchanged at three per cent.

RBA governor Glenn Stevens said rates were already very low but he left open the possibility of further cuts.

Executive director of mortgage broker Loan Market Group John Kolenda said the RBA could cut the cash rate to as low as two per cent.

"They have left themselves with plenty of room to maneuvre, unlike other central banks around the world," Mr Kolenda said in a statement.

He also said that borrowers should budget for the possibility of quick rate increases when the economy recovered and should repay more than their minimum requirement before then.

"The big rate cuts of up to one per cent each month we saw late last year and early this year could be reciprocated in future when the RBA looks to adjust rates upward," he said.

Resi Mortgage Corporation head of consumer advocacy Lisa Montgomery said borrowers should remind themselves that interest rates were at historic lows, making it the perfect time to get their finances in order.

"What we are now seeing is most borrowers buckling down and reviewing their financial structure based on what cuts have been currently delivered - and that's really the best strategy they should be adopting," she said.

Ms Montgomery said that part of the reason the RBA didn't cut again on Tuesday was that the full benefit of previous cuts had not been passed on to borrowers.

The Housing Industry Association (HIA) said that business borrowers had not received anywhere near the full interest rate cuts of the RBA's previous decisions.

"HIA continues to question why the small business sector is expected to subsidise bank profits," HIA managing director Ron Silberberg said.

Dr Silberberg also said it made sense for the RBA to hold off on further cuts as it assessed how the economy was going.

"Today's decision displays confidence in the ability of the Australian economy to negotiate its way through a very challenging economic period," he said.

Listed mortgage broker Mortgage choice said it was happy to see the interest rate kept unchanged and that the current property market could encourage those looking to enter to buy investment properties.

"Purchasing a home before an investment property isn't a rule, and there are some areas currently experiencing impressive rental yields," Mortgage Choice senior corporate affairs manager Kristy Sheppard said.

"In recent years, more people are initially investing in property to rent out and then use the knowledge, tax breaks and equity gained from that venture to buy their own home."

 



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