50 bp cut at april RBA meeting

[daniellee]

zero rates will only help lenders, not individuals / companies.

the banks wont go giving ANYONE a 2% mortgage rate.

Yup. No bank here is going to offer that rate.

Even in Singapore (where I come from), I purchased a Off-the-Plan 3 bedrm higher end public housing apartment back in Feb 2008 using the subsidized fixed interest rate of 2.6% for the life of the loan (30 yrs).

The lowest private banking rates in Singapore currently are around 3.75%.

Regards
Daniel

 

[keithj]

Frankly I think this obsessive discussion about 0.5% this month or next month is boring. It really is very peripheral unless you are a bond trader.

Nah... it's just us with lots of debt that obsess about it... 99% of the popln don't give a dam.

Personally, I think they should cut rates by 3% next month and have a 0.25% rate earlier, so people can have more useful things to think about rather than when/how much cut debate. There is ZIRP everywhere else, I see no reason why we won't get zero short term rates here. Whether that is by the end of the year or next year is pretty irrelevant to how property will perform IMO.

A couple of reasons why they shouldn't....

-3% would cause panic - the population would wonder what bad stuff the RBA knows that we don't.

Once the RBA gets to below 2% it stops having much effect - the banks have no margin to pay depositors, so they can't drop lending rates.

ZIRP isn't working in US because no-one is on a variable rate.

Our rate has fallen even more than other countries because we started higher.

A$ would plummet.

 

[Aaron Sice]

all the more reason to call no cut.

 

[Shadow]

ZIRP isn't working in US because no-one is on a variable rate.

Here is an interesting chart to reinforce that point. Despite the fact that the OCR in Australia has fallen by the least amount, our fixed and variable mortgage rates have fallen by a greater amount than in the US or UK. This is because our banks are in better shape and have been passing on more of the official cuts.

 

[boz]

Here is an interesting chart to reinforce that point. Despite the fact that the OCR in Australia has fallen by the least amount, our fixed and variable mortgage rates have fallen by a greater amount than in the US or UK. This is because our banks are in better shape and have been passing on more of the official cuts.

Just to warn the readers that this is a very shallow analyisis:
main weak point is that no indication of length term in fixed interest rates loans (it is very different if you compare the 3 years loan with 10 years or 30 years), second is that the reduction in basis point need to be specified better as, for example, it is far different a rate reduction from 6% to 3% then 9% to 6%. Third point is a very difficoult matter to stabilise if and which banks are and will be in better shape in the future, I wouldn't bet much money on AUs banks.
Finally what is the bottom line? In Us wealth has moved less then Australia from creditors to debitors with those rate reduction. This would mean that in australia more then US most borrowers are better off then savers like pensioners or superfunds, overall wealth is not changed very much at all with those rate reduction. Is this really such a important matter?