The rate that stopped the nation!
As all the worlds punters were tuning into sweep stakes, trifecta, quinella's, best race day hat awards, the Reserve Bank of Australia (RBA) stole a little of the famous race's thunder.
Squeezing in their announcement half an hour before the race, Governor Glenn Stevens released a "shock" announcement the Board had decided to reduce the cash rate by 25 basis points to 4.50%.

It noted moderations in Australian and Global growth, along with the recent turmoil in the global financial markets. The RBA also expressed some concern about the continued uncertainty with Sovereign debt and banking issues in Europe. A special mention was made regarding the recent decline in commodity prices.
What does this mean for us in Australia?

The RBA noted our economy suggests moderate growth overall. Ongoing robustness of the resources sector combined with the more "cautious" behaviours by households has had a notable dampening effect on our economy and growth.
I presume "cautious" is a typo, when Australian households are paying down debt and saving money, I would suggest this is better worded as "sensible".
With forecast inflation figures somewhat easing and growth slowing, the RBA said it's mildly restrictive stance of monetary policy should be replaced by a more neutral position, thus a rate reduction.

With this decision taken at 2.30pm, the banks/lenders were swift to act and get in on the post cup party by reducing their variable rates by the same as the RBA 0.25% - hurrah!. Westpac, ANZ and CBA (to note a few) were out of the gates swiftly full of party cheer and for their clients, a happy end of day with a few dollars put back in the pocket to replace their earlier losses on the horses.

NAB did somewhat poo poo the party and decided to keep a little of the RBA cheer, but I can only sympathise with NAB when having only $5.9 billion of profit to declare to market when the rest of the "brat pack" are punching out $6 billion plus in profits.

In summary, there is still hot competition in the variable rate space with all banks fighting for market share. Your broker can search out the best deals for you, and we are happy to do a mortgage review.

If however, you want a little peace of mind and certainty over the next 2 or 3 years, fixed rate loans are becoming hotly contested by the banks from 6.20% to 6.50%. The RBA has made it clear in its statement we are not in a global meltdown and financial market pundits do not expect the RBA to heavily reduce its cash rate in coming months, so it is reasonable to consider fixed rate options when there are discounts to be had over a variable rate.

Remember, there are no longer deferred establishment fees incurred for newly written loans, so once the new fixed rate expires, we can shop around and get you the most suitable loan and rate for you.

I look forward to speaking with you all very soon, call our office number today at the top right of this page!

Chris Booth
Announcer Mortgages