The RBA is likely to cut the cash rate this month as coronavirus spread
Borrowers should see their home loan rates fall further amid strong expectations the cash rate will drop to a new all-time low.
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Borrowers should see their home loan rates fall further today amidst strong expectations the cash rate will fall to a new all-time low.
The Reserve Bank of Australia is tipped to drop the cash rate most likely by 0.25 percentage points to just 0.5 per cent, delivering more relief for borrowers but more pain for savers.
The nation’s benchmark ASX200 index plummeted by 9.8 per cent last week and smashed $210 billion from its value.
And the value of the nation’s top 200 companies fell again on Monday by another 0.8 per cent as the fallout form the coronavirus continued to sweep the globe.
CommSec senior economist Ryan Felsman said “markets were pricing in a greater than 100 per cent chance of a cut from the Reserve Bank cut”.
“The ASX200 was down by 9.8 per cent last week and then the US Federal Reserve chair Jerome Powell came out on Friday and said the US will act appropriately to support the US economy,” he said.
“Following the Chinese manufacturing services index for February which were the worst on record, we think there may be a co-ordinated approach by central banks to cut interest rates.”
CoreLogic figures released on Monday showed housing values climbed by 1.1 per cent across five of the nation’s capital cities reaching a record high.
The strongest gains for the month were in Sydney (up 1.7 per cent) and Melbourne (up 1.2 per cent).
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Annually Sydney and Melbourne received double-digit annual growth rates with values climbing up 10.9 per cent and 10.7 per cent respectively.
Finsure managing director John Kolenda, who manages companies including 1300HomeLoan said a cash rate cut was likely today or next month which would deliver deals into “uncharted territory”.
“Rates would normally fall by 25 basis points if there is a cut, so we will see an easing of about this,” he said.
“We are likely to see rates under 2.5 per cent, but savers won’t be so lucky.
“A consequence of rate reductions is the easing on deposit interest rates as well.”
Mr Kolenda urged borrowers to take action to try and snap up cheaper deals.
“We have the vast majority of consumers who are paying much higher rates, I would urge them to go back and revisit their interest rates and look for better options.”
At the moment the cheapest variable rate deals are 2.69 per cent.
On a $300,000 30-year home loan if a cut happens and the cheapest deals fall to 2.44 per cent, this would see monthly repayments fall by $39 a month.
This would save a borrower $14,100 in interest costs over the life of the loan.
Mr Felsman said if a rate cut is delivered the winners would be “people with loans or home loans”.
“But self-funded retirees will suffer in this environment, savers in particular, term deposits are around 1 to 1.5 per cent at the moment and people relying on interest income will struggle to provide yield particularly with shares under pressure at the moment,” he said.
He said the Morrison Government was trying to create some stimulus with $2 billion of bushfire infrastructure recovery and tax cuts in place.