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Double Interest Rate Cut Tipped for September

August 10th 2011

The clouds of economic gloom gathering over the US and Europe could have a silver lining for Australian borrowers – a double rate cut is now predicted for next month.

After global shares sustained $2.5 trillion losses last week and US government had its credit rating cut by Standard & Poor’s late on Friday (US time), investors are now pricing in a 50 basis point cut by the Reserve Bank when its board meets on September 6, according to Credit Suisse data.

A move of that size would lop the official cash rate from 4.75 per cent down to 4.25 per cent and save the holder of a $300,000 mortgage about $93 a month if passed on in full by the commercial lenders.

Until a little over a week ago, most commentators had been tipping the next rates move by the central bank to be an increase following sharply higher inflation figures in the June quarter. That sentiment took a 180 degree turn during last week’s global sharemarket rout, a slide that looks like continuing into this week.

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