Hi Property Lovers
Some joy for home owner's today.....This report from news.com.au
THE Reserve Bank board has surprised the market, and left home owners relieved, by leaving its official interest rate on hold today.
The market had expected that the Reserve Bank would increase its rate by 25 basis points.
The central bank board has decided to take stock of the recovering economy, even as core inflation remains above its target range and house prices continue to rise.
Economists still expect the Reserve Bank aims to move its cash rate towards a "neutral" setting this year.
AMP Capital investors senior economist Bob Cunneen said Australia was still on course for a cash rate of five per cent by the end of calendar 2010.
"It's just basically a stay of execution," he said on today's decision.
"The bank is just waiting for more information before it moves again.
It's really a board that's said `we've started tightening the screws, but there is no need for pushing on now'.'
NAB, Westpac and Commonwealth said they would hold their standard variable interest rates on mortgages steady.
The Government has welcomed the board's decision to hold fire.
"Today's decision means a family with a $300,000 mortgage are still paying around $600 less than they were paying 18 months ago," Treasurer Wayne Swan told parliament today.
Economic conditions 'stronger than expected'Reserve Bank governor Glenn Stevens said that economic conditions have "been stronger than expected, after a mild downturn a year ago".
"The effects of the fiscal stimulus on consumer demand have now faded, but household finances are being supported by strong labour market outcomes and a recovery in net worth," he said in a statement.
"Public infrastructure spending is now boosting demand, as is an upturn in housing construction. Investment in the resources sector is strong.
"The rate of unemployment appears to have peaked at a much lower level than earlier expected.
"Inflation has, as expected, declined in underlying terms from its peak in 2008, helped by the fall in commodity prices at the end of 2008, a noticeable slowing in private‑sector labour costs during 2009, the recent rise in the exchange rate and a period of slower growth in demand."
Last October the Reserve Bank became the first central bank to increase its rate, as the Australian economy began growing again while other nations continued to grapple with the financial crisis.
By the end of the year, the Reserve Bank had increased its rate by a total of 75 basis points.
Mr Stevens said that lenders had raised rates at a faster rate than the Reserve Bank increased its cash rate.
"Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point," he said.
"Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being."
But he added that its cash rate would still have to be further tightened in order to keep inflation under control.
"If economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term."
A 25 basis point increase to the official rate would have added about $50 a month to a $300,000, 25-year home, according to research company Canstar Cannex.
In other data out today, business confidence was dented in December by last year's interest rate hikes despite business conditions expanding in the December quarter.
This information was gathered from:
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