96% chance that rates will drop by 1% at next RBA meeting

Nth Brisbanite said:
I think that the banks will pass on the full amount. Their costs of borrowing have decreased since Mr Rudd guaranteed the deposits Australian banks.
Click to expand...
I suspect they won't pass on the full amount but it's only a guess.

Last couple of times there has been one party trying to get the publicity jump by a week, lowering before the announcement, wonder if that will happen again?
 
Seems to me there's a lot of "follow the leader" with the Banks. One says "I'm only going to drop 0.8% (of the RBA's 1%)" But then, a few days after (when other Banks step in and drop the full 1%) the laggard falls into line.

But, they are still ~ 0.75% above where they were (relative to the RBA's cash rate) in Nov 07..... I'd love to see "that extra bit above RBA" come into MY favour...... Even as they cream this extra, other Bank fees are climbing through the roof !! :(

Maybe I should just buy their bloody shares - there's got to be a way to win..... But buying their shares hasn't looked too bright in the last few months :eek:

Regards,
 
I would be looking at a rate cut of 100ps in February and then another large cut to the cash rate in March. I also think there is more trouble to come out of the USA which can scare the market even more. With the ASX 200 dropping 4.1% on Friday to 3,342.700 points & who knows how low it may go.

The main area that we are still seeing dramas is in the Commercial Lending market so look out for more cuts this year.

James Grady
Mortgage Planner
http://www.theNEXThomeloan.com
1300 660 107
 
Here's a link to a reuters page showing the reserve bank interest rates of various countries (which I think is updated daily)

http://uk.reuters.com/article/marketsNewsUS/idUKGLOBAL20090129

"The Bank of Canada cut its key interest rate by a half percentage-point on Jan. 20 to a fresh 50-year low of 1.0 percent. As a result, the average rate set by central banks of the Group of Seven nations fell to 0.95 percent from 1.05 percent. The Reserve Bank of New Zealand cut its benchmark rate by 150 basis points to 3.5 percent on Jan. 29. As a result, the average rate set by 11 leading central banks -- the five that decide monetary policy for the G7 nations plus six other major banks -- fell to 1.91 percent from 2.04 percent."
 
my only concern is buying in low rates, and then when rates rebound, we will be stuck with much higher interest rates.

I would guess you would be carefully watching the fixed rates?

At least with rent going up, this helps, but from my experience in early 2000's, rates were cheap, and then on my 3 IP's the interest went from close to cash flow neutral, to $30k PA loss.. plus rents didn't go up at all, infact I had to drop them to get tenants in.
 
I'm tipping with the rash of negative news coming in daily the RBA may just say what the hell, we're dropping 1.25-1.5% in Feb, without waiting till March. Why wait - there is one known fact, that is, jobs are being shed everywhere and loan defaults are bound to rise if/when that escalates?

More important to me though, as much as I want a massive rate cut asap, is what net impact the drop/s in interest rates and growth in unemployment will have on rents. I'm fearing rents will stall at best, and perhaps fall, offsetting some of the benefit of low IRs. I'm already seeing that in most of Sydney.
 
theNEXThomeloan said:
I would be looking at a rate cut of 100ps in February and then another large cut to the cash rate in March. I also think there is more trouble to come out of the USA which can scare the market even more. With the ASX 200 dropping 4.1% on Friday to 3,342.700 points & who knows how low it may go.

The main area that we are still seeing dramas is in the Commercial Lending market so look out for more cuts this year.

James Grady
Mortgage Planner
http://www.theNEXThomeloan.com
1300 660 107
Click to expand...

Welcome James,

My thoughts exactly! I have been saying since December that it will be 100bp's. The RBA will go as low as they need to, we all know the banks rarely pass on the full cut.:eek:

Guess we'll find out shortly.

Regards JO
 
lol, ninemsn news has ross greenwood live @ 230 announcing, news.com is better afterwards for in depth details tho... re: banks reducing their margins..
 
today the private credit data was very very very bad. i think the 1% cut is the lowest possible and 1.25 more likely.
here is a good update from bloomberg:

Jan. 30 (Bloomberg) -- Australian bank lending unexpectedly fell in December for the first time since 1992 as borrowing by companies slumped, increasing pressure on the central bank to cut interest rates next week to ease a squeeze on credit.

Total loans provided by banks and other finance companies declined 0.3 percent from November, the Reserve Bank of Australia said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a 0.5 percent gain.

Miners BHP Billiton Ltd. and Rio Tinto Group are among companies that have cut investment spending and fired workers, adding to signs Australia’s economy is headed for its first recession in almost two decades. Central bank Governor Glenn Stevens has slashed borrowing costs by three percentage points since early September and will cut the benchmark rate by one point next week, according to investors.

“The figures confirm the credit rationing and tightening up of lending standards of recent months,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney.

Businesses also “have little appetite for debt and growth,” she said. “The impact on output and employment has yet to be fully felt.”

Australia’s dollar slipped to 64.60 U.S. cents at 1:22 p.m. in Sydney from 64.81 cents just before the report was released. The two-year government bond yield dropped 5 basis points to 2.43 percent.

The benchmark S&P/ASX 200 index fell 0.7 percent to 3,500.9, extending its decline this month to 6 percent. Shares in miners and banks led today’s drop.

Rate Expectations

Investors expect central bank policy makers will reduce the benchmark rate to 3.25 percent on Feb. 3 , according to a Credit Suisse Group index based on swaps trading. That would be the lowest rate since the 1960s, central bank data shows.

Concern over a decline in businesses access to credit prompted Prime Minister Kevin Rudd last week to signal the government is prepared to act should foreign banks fail to roll over as much as A$75 billion ($48 billion) in corporate loans in the next two years.

Lending to companies shrank 1.1 percent in December, the biggest drop since 1992, according to central bank data.

Companies are reviewing expansion plans as a deepening global recession cuts export demand and prompts domestic consumers rein in spending.

Melbourne-based Orica Ltd., the world’s largest explosives maker, said today it’s finalizing job cuts which may be in the “hundreds” as mining companies pare spending.

Production Cuts

BHP Billiton said last week it will shed 3,400 workers in Australia as it shuts a nickel mine, closes part of a refinery and reduces coking coal output as much as 15 percent.

Rio Tinto said on Jan. 14 it will cut production and slow spending on a A$1.86 billion expansion of its Argyle diamond mine in Western Australia, potentially cutting as many as 200 contract positions.

Total credit rose 6.7 percent in December from a year earlier, the smallest annual increase since April 1994.

“We hadn’t expected such a big slump in business lending,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “This gives the Reserve Bank more scope to cut rates aggressively” next week, she said.

Governor Stevens reduced the benchmark overnight cash rate target to a six-year low of 4.25 percent last month.

Credit provided to consumers for purchases other than housing tumbled 1.1 percent from a month earlier, today’s report showed. Loans to consumers to buy houses rose 0.4 percent for an annual gain of 7.6 percent, the weakest growth since 1983.

‘A lot of households are boosting precautionary savings rather than taking on extra loans,” said JPMorgan’s Kevans.

Australia’s economy grew 0.1 percent in the third quarter, the weakest pace in eight years. Consumer prices declined by the most in 11 years last quarter and the jobless rate rose to a two-year high of 4.5 percent in December, recent reports show.

To contact the reporter for this story: Jacob Greber in Sydney at [email protected]
Last Updated: January 29, 2009 21:38 EST
Click to expand...
the au$ falling today is a sign of bigger cut expected.
My view is that fixed rates wouldn't move much unless goverment throw more taxpayer money into mortgages like in other country like UK or US
 
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