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Rate relief finally delivered

Staff Reporter 2 minute read

The RBA today cut the official cash rate by 25 basis points to seven per cent – the first reduction in nearly seven years and welcome news for brokers and borrowers alike.

In cutting rates, RBA governor of monetary policy Glenn Stevens said “tight financial conditions, in conjunction with other factors including fuel costs and lower asset values, have exceeded the needed restraint on demand”.

Today’s RBA decision ends a seven year cycle of rate rises.

The cash rate has increased 12 times since December 2001, from 4.25 per cent to 7.25 per cent in March this year.

While an explosion of borrower activity is unlikely as a result of this month’s cut, there is renewed optimism in the broking industry.

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“We expect to see a slight increase in lending activity based on an increase in borrower confidence,” said Kevin Frost, head of aggregation at eChoice.

While Mr Frost did not expect a widespread revival for lending activity he said there would be opportunity for brokers in some sectors – highlighting refinancing, investors and first home buyers.

“There should be some good buying in the real estate market for first home buyers and investors as the buyer market has shrunk decisively,” he said.

Gerard Tiffen, managing director of brokerage Tiffen and Co, however expects the rate cut may take some time to gain traction.

“My experience has been that it usually takes somewhere around three months before the impact starts to feed into the system,” he said.

Published: 02-09-08

Has the RBA cut rates far enough; will lending activity pick up as a result? COMMENT HERE


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