Home Buyers Wait On Bank Mortgage Relief

The Age

Tuesday September 2, 2008

Peter Martin, Economics Correspondent

THE Reserve Bank is expected to deliver mortgage relief to more than 2 million households today by cutting official interest rates.

The likely 0.25 percentage point cut in the Reserve's cash rate would be the first in seven years, saving home buyers about $10 a week.

The Reserve will announce its decision at about 2.30pm and within minutes two of the big banks, the National Australia and the ANZ, are expected to honour their promise to apply the cut to their standard variable mortgage rates.

The ANZ's standard rate would fall from 9.67% to 9.42% and the National Australia's standard rate from 9.61% to 9.36%.

The Commonwealth Bank said it had promised to "do our best to pass on as much as we can to our customers".

On Sunday, non-bank lender Wizard got in early, cutting its standard variable mortgage rate by 0.25 percentage points to 9.29%.

The 0.25-percentage-point cut expected from the Reserve would reduce the repayment on a $250,000 mortgage by about $43 a month if fully passed on by the banks.

Federal Treasurer Wayne Swan yesterday stepped up pressure on all the banks, saying that if they did not pass on the full rate cut they would be "challenging the authority of the Reserve Bank and the authority of the governor, and that's a challenge to the authority of monetary policy".

Mr Swan said he had directed the Treasury to "have a good look at all competitive aspects of the market".

Opposition Leader Brendan Nelson called on the Reserve Bank to double the expected 0.25-percentage-point cut, saying there was "every justification" for rates to be cut by half a percentage point.

But when asked whether he would provide advice to the bank in the same terms if he became the prime minister, he said he would not.

"I am the Leader of the Opposition, and in that sense, somebody has to stand up for Australians, for Australian workers, Australian businesses," he said.

In Parliament, Prime Minister Kevin Rudd savaged him for introducing a "new Nelson doctrine - what I say in opposition has nothing whatsoever to do with what I do in government".

"How can the Leader of the Opposition stand credibly in the Parliament when he goes out and says that the Reserve Bank should take a particular course of action and, in the same breath, say that if he were prime minister he would not say that or do that?" Mr Rudd said.

The Reserve Bank board will make its decision this morning after a briefing about the state of the Australian and international economies.

The minutes of its previous meeting concluded that "less restrictive conditions could soon be called for", warning that "otherwise the risk of a deeper and more persistent slowing in the economy would increase".

Under new procedures introduced after last November's election, the board's move will be announced at 2.30pm, which for the first time will be in the middle of Parliament's question time.