RBA Disappoints Consumers: Loan Market

Borrowers seeking relief from the uncertain economic climate and cost of living increases will be disappointed the Reserve Bank of Australia (RBA) has resisted the chance to lower official interest rates, says leading mortgage broker Loan Market.

Loan Market Corporate Spokesman Paul Smith said most consumers had been expecting the RBA to reduce the cash rate again after 25 basis point cuts in both November and December last year.

The RBA has decided to leave rates on hold at 4.25 per cent which is a blow to borrowers hoping for some further relief, Mr Smith said.

Mr Smith said a recent Loan Market consumer survey found the majority of respondents had been anticipating more reductions to the cash rate.

He said lingering concerns about the debt situation in Europe and the unstable global financial markets as well as continued softness in domestic economic sectors such as retail would be triggers for further action from the central bank.

Mr Smith said the RBA likely held off reducing rates due to considerable mixed economic signals in the market such as a mid-range target inflation rate of 2.4 per cent.

We thought the RBA could have applied a 50 basis points cut this month but they have taken a more cautious approach and still have plenty of room to move, he said.

While the fundamentals of the Australian economy remain quite strong and consumer sentiment has been improving, sections of the economy can only benefit from the stimulus provided by lower interest rates.

Loan Market