News Center – Springhill Group Home Loans : Fed Seen Buying $545b Of Home-loan Debt : Report

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The deteriorating situation in Europe has increased the chances of a December interest rate cut.

Australian banks are coming under increasing pressure from the ensuing European debt crisis, and have become nervous about lending to each other because of their exposure to risky European debt. Consequently, there are concerns about the risks if the Reserve Bank does not cut interest rates, with the next opportunity not until February. The Reserve Bank Governor, Glenn Stevens, ramped up the pressure on European leaders to find a swift solution to the crisis, saying that “the damage to us and everyone else will be unacceptable”.

It is not immediately clear, though, whether banks will be so eager to pass on the full benefits of any such cuts to consumers. The recent interest rate cut saw every major bank reduce their home loan rates by the full 0.25% with the exception of NAB, who faced strong criticism for their decision to offer less.

However, Australian banks are facing higher costs of funding due to the rising cost of lending across global money markets. It is suspected that these costs will be passed ...
... onto consumers by not passing on the full benefit of central rate cuts.

Therefore, it is predicted that the Reserve Bank’s committee will have to cut interest rates by a bigger margin if it hopes to see any monetary benefit reach consumers.

One advantage for the consumer is the legislation meaning that home loans can now be transferred without exit fee, ensuring a greater level of competition between retail banks.

It may be the right time to consider Which4U’s current savings account rates, in case these are set to fall in the near future.

Ashley King
Monday, 28 November 2011 13:19