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RBA makes highly anticipated call on interest rates for February

RBA makes highly anticipated call on interest rates for February

1 February 2016, 12:00 am Written by 

The Reserve Bank of Australia has kept the cash rate on hold at its record low level of 2 per cent.

It is the eighth month in a row the RBA has left the cash rate on hold, with most economists expecting no change until the second half of this year at the earliest.

Mr. Glenn Stevens let the market to guess when and even whether next rate cut to come. On one hand, he left the door open for further monetary easing in the statement accompanying the rate decision. On the other hand, he remained optimistic about the local economy as a whole.

For home loan borrowers, more interesting is what the banks will do without RBA's cash rate movement.

In the end of day, banks determine their mortgage rate by so called "lending cost", not RBA's cash rate, and the margin they want to put on as their profit.

It is most evident by fixed interest rates which are totally independent of RBA's cash rate decision.

Recently we have also experienced banks increasing variable rates on their own.

Major banks started dancing to their own tune by raising interest rates between 0.15% to 0.20% in October, blaming tougher lending regulation. And smaller lenders all followed suit, even though the regulatory changes didn't apply to them.

Is it going to become a norm? Only time can tell.


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