Home Owners Anticipate Rate Hold in September

According to an online poll, a majority of Australian home owners expect the RBA to leave rates on hold on Tuesday after the reserve bank board decided to drop them to a record low in August.

The survey of 482 home owners by mortgage broker Loan Market revealed that 51 per cent of respondents did not anticipate a rate reduction this month while 38 per cent felt the RBA would lower rates another 25 basis points.

Loan Market director Mark De Martino said that he agreed with the majority of home owners because the RBA still needs time to assess the impact of the last rate reduction and that the any further rate movements will probably be made after the election.

“A cash rate of 2.50 per cent has injected lots of activity into the home finance market over the past three weeks. Our online enquiries were up nearly 30 per cent after the August rate reduction and this was a result of all lenders making the right competitive moves,” Mr De Martino said.

“The looming federal election will likely cause the RBA to wait-and-see who ends up in the lodge and what economic promises they end up following through with. The RBA will want to work alongside the spending or saving commitments of the new government,” he said.

Mr De Martino said that a September rate cut seemed unlikely because the financial markets were not pricing in a rate reduction with the same confidence and certainty they did in August or May this year.

“Most of the major banks and markets are anticipating rates to end the calendar year at least 25 to 50 basis points lower than they are today. In the home finance space this is evidenced by the continued dropping of fixed variable rates. For the broader economy, how the dollar performs over the next few weeks will be critical for the RBA’s rate decisions for the remainder of 2013.”

Survey Results

What action do you expect from the RBA at its September Meeting?

A) rate reduction of 50 basis points 6%

B) rate reduction of 25 basis points 38%

C) no rate movement 51%

D) rate increase of 25 basis points 5%