Interest rate cuts may ease mortgage stress, but will lenders pass them on?

After two interest rate cuts and lots of rumours of another interest rate cut in February, mortgage holders may feel some pressure being lifted.

However, it is uncertain how many more rate cuts will be passed on to mortgage holders. ANZ has already started to do its own monthly interest rate review and other lenders may follow. The lenders argue that they borrowed funds at a higher rate so it is not feasible for them to pass on all rate cuts and remain profitable. They are receiving little understanding from borrowers given they recently reported huge profits and are cutting large numbers of staff.

It was a good PR move to pass on the December rate cut, a nice bonus for struggling family’s right before Christmas, but it is uncertain if the goodwill will continue.

So far, the retail industry and property market have not seen much of an impact from the two recent rate cuts. More rates cuts and some consumer confidence are needed to change this. The economy is stable but there is lots of uncertainty about, job cuts by the big banks, the Europe crisis and  contradicting arguments from all sides are keeping people on their toes and slightly nervous. Not many mortgage holders are running out spending all their spare cash. All we can do is wait and see, being cautious in the meantime.

Til next time,

Lesley