RBA Drops 100 Basis Pts - Largest in 16 Years -

The time has come for some drastic measures from the RBA. Fortunately the Reserve Bank of Australia has slashed the cash rate by a full 1% (or 100 basis pts) to help stem the tide of the market slow down.

This is some very positive news and in line with this Westpac has announced it will pass on up to 80 basis points to its customers, given this lead from a major bank we should expect to see the other majors follow suit shortly.

The RBA has made a very positive move forward to help kickstart the economy as the inaction of the ruling government has seen prices of fuel, shopping and general living skyrocket as they have been unable to put a cap on inflation through diligent fiscal management.

The decrease in the interest rates has come at the right time for the retail sector as well, especially leading up to Christmas. By the time the decreased rates are passed on and the positive impact is felt by all who have a home loan it will be just about Christmas time.

What this means is that retailers should see some benefit by way of heightened activity as compared to the previous trading quarters which saw sales slump. With more money injected into the retail sector this could also mean the creation or sustaining of more retail sector jobs and this can only be a good thing.

I believe that there is still more fall out yet to come from the US Credit Crisis but in the same breath I also believe that the RBA have responded quickly enough to counteract future effects of the crisis. Hats off to the RBA for making such a big call and dropping the rates a full percentage point for the first time in 16 years, if you're old enough to remember this was during the 'recession we had to have'......

The credit rating blog is still on the cards and will be out shortly, I thought this was more important at this stage to highlight to the readers of this blog.

RBA To Drop Rates - What are the Banks Doing?

The RBA is set to drop rates yet again but before you breathe a sigh of relief the major banks have already stated that they would not pass this onto the consumer. In my view this is an absolute joke and simply a profit grab from the banking institutions.

Think back a month ago when the RBA dropped its rates and the banks followed suit, this time the banks will not drop their rates so in effect what the banks are doing is regaining any lost profit margin they gave away last month! Welcome to shareholder return at the cost of the community!

What makes matters worse is that the Australian government in all their wisdom have seen fit to not enforce the lowering of rates to the consumer. In essence the Australian Government has become a toothless tiger, since when does the corporate sector not have to follow the guidelines set out by a government and how come the average person has to bear the brunt of profiteering.

We are up in arms about fuel prices and consumer watchdogs are all over oil companies like a rash but the banks seem to dictate their own terms regardless of whats good for the Australian economy.

If the government of today were to really make an impact then they should enforce through legislation that the banks do pass on the decrease to consumers so that the flow on effect will be that little light of hope for all who have a home loan.

To find out more please contact me via e-mail or go to my website which is www.aussiewisefg.com.au and you can touch base with me through there.

RBA Drops Rates - What does that mean for my Home Loan?

The RBA recently dropped its cash rate by a quarter percent and although this is a positive move forward it does little for someone with a home loan when on average the savings equate to around $40 per month.

The RBA have touted that they will be decreasing interest rates again a further 3 or 4 times across the coming 12 months, then and only then will the home loan market be able to breathe a sigh of relief. When the average person all of a sudden has a further $200 to $300 per month will the market start to grow again, these savings will help compensate for the higher cost of fuel and in turn day to day living.

There have been rumours that the RBA may decrease interest rates again prior to Christmas, now is this to help people with home loans? I don't believe so, the real reason this move would happen is to inspire some confidence in the general market leading up to the crazy Christmas shoppign season.

You see if people believe that they have more available funds because of home loan repayment savings then human nature dictates that the first thing one does is to go and spend it! This may sound insane but is it a ploy to inject some life into the struggling retail sector, if the RBA does decrease home loan interest rates then the most likely result would be a stronger Christmas trading season for all retailers.

The flow on effect of this is that jobs will remain in place and potentially grow within the sector itself. Mums and Dads will be happy as they are able to buy those items they couldnt afford a few months ago and the average Australian has a smile on their face.

When the general populous is happy then consumer confidence increases and this has an impact across all market spaces.

As far as the home loan market is concerned there is a long way to go before a real positive impact is felt through the RBA's decrease in interest rates, I forecast that this is at least 6-8 months and 4 decreases away.

When it comes to home loan providers and the property market there is still a dim light there although the tough times will remain for another 2 years at least until we see the growth truly come back.

For more information on home loand and other financial products please visit my website which is www.aussiewisefg.com.au and you can contact me there.