RBA to continue to ease rates ahead

We all know about the "credit crunch" and how this has affected Home loan rates, but how many people are in a rut with their current home loan. At eMortgage, we get you out of this rut, get you the most competitive product to suit you and the bottom line is that once you are an eMortgage client, you will stay a client as we don't lose clients once we have them.

The rebalancing of the economy towards investment, mining and agriculture and away from imports and consumption will be welcomed by the RBA. It has feared that a lack of spare capacity juxtaposed to strong household demand would keep inflation too high for too long.

It now appears that the combination of high interest rates, high petrol prices and falling asset prices has stifled household demand but the ongoing strong demand for commodities out of China and Asia more generally is generating strong investment across the economy and encouraging resources to flow to industries and geographical locations where they can make the largest contribution to Australia's economic prosperity ahead.

Still, the slowing in household demand is pretty worrying, sufficient to set the stage for another cut in rates at the October Board meeting. Provided the run of data continues to show ongoing economic weakness, the RBA remains likely to cut by 25 bps at its October Board meeting. Economists see a total of around 125bps of RBA cuts for this cycle, with one more 25bps cut in October and then three cuts in early 2009. This would put the cash rate at 6%. Try to keep your current mortgage repayments despite the rate drop, as it will pay off down the track.

The Banks are aware of the likelihood of further rate cuts and have reduced their fixed rates accordingly, however now may or may not be the time to look at fixing your interest rate.

In my previous role, I was a Manager at the NAB and I know firsthand how many clients are currently being charged standard rates when they shouldn't be. Discounts of 0.7% to 0.8% off standard variable rates can be achieved. Please feel free to phone or email me to make sure that you are not one of those clients that the Banks are charging standard rates. It only takes a couple of minutes and can save you thousands.

Colin McManus

Senior Mortgage Adviser

Shop 2, 380 Bong Bong Street Ph: (02) 4861 6488

Bowral NSW 2576 Fax: (02) 4861 6544

email: colin@emortgage.com.au Mobile: 0448 300 130

Web: www.emortgage.com.au

Mail: PO Box 553, Bowral, NSW, 2576.