Various Market Updates… December 2, 2008

Posted by George Mihos
December 2, 2008

Five per cent mortgage rates coming soon  02/12/2008

Standard variable mortgage interest rates could fall to five per cent within six months, taking them to the lowest level since 1964 when they were fixed by the federal government. The Melbourne Institute-TD Securities inflation gauge is negative for a second successive month, suggesting prices will fall in the December quarter which could signal a period of deflation. The Reserve Bank is expected to cut the official cash rate by one per cent today and make further cuts over coming months to take the official rate to around 2.5 per cent.
Source: The Age

CBA, NAB pass on full RBA rate cut…

Only Commonwealth Bank and National Australia Bank have heeded the government’s call to pass on in full the interest cuts announced by the Reserve Bank of

Australia.

While the two passed on the full one percentage point rate cut within minutes of the RBA decision being made public, Westpac and ANZ Banking Group passed on about 0.8 percentage point of the reduction, saying wholesale funding levels remain at record highs.Three of the banks issued statements within 15 minutes of the RBA announcing it had reduced the overnight cash rate to 4.25 per cent - the lowest in six and a half years.ANZ was content to announce its rate cut late in the afternoon.“It is a bit of a battle for publicity,” said Kristy Sheppard, spokeswoman for home loan broker, Mortgage Choice.“Everybody’s watching the media very closely and if a lender can get out there with their message first that their matching the full rate drop, then they’re going to be looked upon favourably.”Ms Sheppard said feedback from Mortgage Choice brokers and surveys suggested three-quarters of mortgage holders would maintain higher repayment levels to pay back their loan more quickly.That move will help reduce

Australia’s household debt, which has been more than 150 per cent of annual disposable income for the past two and a half years, RBA data shows.Commonwealth Bank,

Australia’s biggest home loan lender, got in first on Tuesday, issuing a statement saying its Complete Home Loan variable rate will be cut to 6.74 per cent, from 7.74 per cent.The Sydney-based bank will also reduce its variable business rates by one percentage point, with the cuts effective from December 12.“I am pleased to announce that we are able to pass on the full interest rate cut on all variable home loan rates to our customers, as we are committed to remaining competitive in the home lending market,” CBA retail banking group executive Ross McEwan said in a statement.NAB, the country’s biggest bank by assets, will also reduce its standard variable mortgage rate to 6.74 per cent on December 12.The Melbourne-based bank, which is

Australia’s biggest business lender, will also reduce its variable business lending rates by one percentage point.“Our steady growth in deposits and the strength of NAB has contributed to us being able to pass on this month’s full rate cut to customers,” NAB chief executive for Australia Ahmed Fahour said.Mortgage Choice’s Ms Sheppard said the decline in interest rates over recent months had created a good opportunity for consumers to buy a property.Westpac, which is the largest Australian bank by market value, will reduce its lending rates by less than its rivals, but will introduce the cuts earlier.

Westpac, Australia’s second biggest home loan lender, said it would reduce its variable mortgage rate to 6.91 per cent, effective from December 8.The Sydney-based bank will also cut its small business lending rate by 80 basis points.“While government guarantee measures have helped restore confidence to global financial markets, short-term and long-term wholesale funding costs remain extremely volatile and at record levels,” Westpac retail and business banking group executive Peter Hanlon said in a statement.“In spite of this continuing volatility, Westpac is pleased to deliver further timely relief to households and small businesses in the lead-up to Christmas.”ANZ, the fourth largest of

Australia’s big four banks, reduced its variable home loan rate by 83 basis points to 6.91 per cent.The reduction will take effect on December 12, and the Melbourne-based bank said it was reviewing interest rates for credit cards, business and farm loans and deposits.“As soon as market conditions allow, we will pass on further reductions in funding costs to our customers,” ANZ chief executive for Australia Brian Hartzer said in a statement.

source msn money 

RBA cuts cash rate by 100 bps to 4.25%

The Reserve Bank of Australia (RBA) has cut official interest rates by 100 basis points to the lowest level in six and a half years, amid signs of a significant moderation in domestic demand.The central bank on Tuesday lowered the cash rate to 4.25 per cent, from 5.25 per cent, for the first time since May 7, 2002.It is the fourth month in a row the RBA has cut interest rates in a bid to head off the impact of slower world growth on an already soft Australian economy.The reduction was more than financial market economists had been expected. Most were looking for a 75 basis point reduction.However, debt futures markets were more optimistic and had factored in a 100 basis point cut.RBA governor Glenn Stevens said the bank’s board had judged a further significant fall in the cash rate was warranted this month to create a more expansionary setting for the economy.“As a result of today’s decision, the cash rate will be at its previous cyclical low point,” he said in a statement.“Given trends in money market yields, most lending rates should fall significantly and will also reach below-average levels.”Commonwealth Bank of Australia Ltd (CBA) and Westpac Banking Corp and National Australia Bank Ltd moved quickly to cut their variable home loan rates within minutes of the RBA move.CBA and NAB each lowered their standard variable rates by 100 basis points.Westpac cut its rate by 80 basis points.“There has now been a major easing in monetary policy over the past few months,” Mr Stevens said.“Together with the spending measures announced by the government, and a large fall in the Australian dollar exchange rate, significant policy stimulus will be supporting demand over the year ahead.“The board will continue to monitor developments and make adjustments as needed to promote sustainable growth consistent with achieving the two to three per cent inflation target over time.”Mr Steven said

Australia’s inflation rate was likely to start to fall soon.“Global disinflationary forces will assist in this regard, though the depreciation of the exchange rate means that the decline of inflation to the target could take longer than would otherwise have been the case,” he added.Mr Stevens said the Australian economy had been more resilient than the economies of other countries, some of which had already fallen into recession.But recent domestic economic data show a significant moderation in domestic demand is occurring.“With confidence affected by the financial turbulence and a decline in the terms of trade now under way, more cautious behaviour by both households and businesses is likely to see private demand remain subdued in the near term,” Mr Stevens said.“With that outlook, and with capacity pressures now easing, it is likely that inflation in

Australia will soon start to fall.”Mr Stevens also noted recent falls in global commodity prices and that financial market sentiment remained fragile.Macquarie Group interest rate strategist Rory Robertson said the RBA had, with its latest cut, reversed some six years of monetary policy tightening in just four board meetings.“The RBA has reversed some six years worth of monetary tightening - from 7.25 per cent - in just four board meetings over just three months,” he said.Economists believe rates still have a way to fall, with some looking for a cash rate of 3.25 per cent next year.Source – msn money Yours with Ethics and Passion

George Mihos  Melbourne

Australia, December 2, 2008

   

Disclaimer:

As always AND before I go on, I’m not offering financial advice; you should always get qualified professional advice when making financial decisions. What I am doing is letting you know what has worked for me and giving you the opportunity to check it out for yourself. This message is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this message as a substitute for specific legal or financial advice. All material is copyright 2008

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