Hibernation ahead? Rate drops may be on hold throughout winter

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Does this month’s rate hold by the RBA represent the beginning of a winter of discontent for struggling property investors? One commentator certainly thinks so.

According to Loan Market corporate spokesman Paul Smith, the Reserve Bank of Australia (RBA) could remain in hibernation through winter while it continues to assess the impact of its previous interest rate cuts.

“Mortgage holders will always be happy to see rates come down but the RBA could stay in hibernation over the winter after back-to-back monthly reductions in May and June,” he said.

“While the RBA sleeps, consumers will still be nervous about the financial situation in Europe and the direction of the domestic economy.

“The impact of the carbon tax is another great unknown, particularly how it will affect consumer behaviour in the months ahead.”

He added that the 0.75% cut in the cash rate seen over the past two months has yet to have a substantial impact on the property market.

“Our own surveys have shown strong support for further rate reductions as some consumers did not believe the previous cuts had made much difference to them – especially as they haven’t been passed on in full by most lenders,” he said.

“The RBA will be under pressure to lower rates further this year and it has plenty of room to move to combat further economic slowdown in various sectors.”

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