4 RBA 2012 Rate Cuts Save Aussie Borrowers Over $21 Billion
With the four overnight cash rate cuts made by the Reserve Bank of Australia (RBA) in 2012, Australian borrowers saved more than $21 billion in extra interest payments, data from Treasury said.
The bases of the estimate are the 4.2 million home mortgages throughout the country worth a total of $1.26 trillion. At an average home loan of $300,000, the annual savings per home loan is about $5,000.
Due to these rate cuts, Treasurer Wayne Swan - who has been pushing lenders to pass in full to borrowers the interest rate reductions that the central bank has made - said the average home loan borrower would be able to repay his mortgage eight years faster.
With the four rate cuts, RBA has reduced by 175 basis points the key lending rate and brought down the overnight cash rate to 3 per cent. ANZ Bank believes the interest rate would even likely dip to 2 per cent in 2013.
Other experts, however, believe the interest rates have reached their lowest point, which is at the same level as in 2009 at the height of the global financial crisis. If the ANZ's forecast would come to pass, it would be a 100-year-low rate.
Mark Hewitt, general manager of sales and operations of the Australian Finance Group advised home loan borrower to lock in fixed rates now. Even before Mr Hewitt's word of caution, 12 per cent of borrowers for new home loans in 2012 opted for fixed loans. The Australian Bureau of Statistics said it is the highest portion since 2008.
However, the figure reached 20 per cent in 2007 prior to the global financial crisis.
Fixed rates have partly come down because variable rates have come down as well and partly on the expectation that the RBA might cut a bit further. Our view is the RBA might be quite close to the end of their easing phase, so fixed rates might also be close to their trough," The Herald Sun quoted HSBC chief economist Paul Bloxham.
CommSec market analyst Steven Daghlian shared his analysis of the RBA December 2012 board minutes which led to the fourth interest rate cut in this video.
