RBA Rate cut is followed by bank rate cuts

07/10/2008

RBA CUTS RATE by 1% Today

Westpac, CBA cut home loan rates by 0.8%

Australian shares rebounded today after the Reserve Bank of Australia surprised investors with a bigger-than-expected rate cut.
The RBA cut rates by a full percentage point to 6%, double the amount that had been expected.

Banks, miners and property trusts led the market higher after the biggest rate cut since 1992.
The benchmark S&P/ASX200 index ended the day up 78.3 points, or 1.7%, at 4618.7, its first gain in four days. The index had earlier slumped 3.3% in morning trading, following a rout on European and US markets. The broader All ordinaries picked up 53.2 points, or 1.17%, to 4597.9.

“This is a shock,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. “They are clearly realizing monetary conditions were way too tight and they needed to do something about it pretty quickly.”

PROPERTY buyers and sellers will “rush back to the market” after today’s huge interest rate cut by the Reserve Bank.

“People will certainly rush back to the market, and the incentives are there, more likely now than ever to buy,” says Phil Naylor of Mortgage and Finance Association of Australia.

The Reserve Bank slashed interest rates by a whopping one percentage point today, to 6 per cent – the largest cut since May 1992.

Westpac and the Commonwealth Bank have reduced their standard variable home loan rates by 80 basis points, passing on most of the Reserve Bank of Australia’s (RBA) cut in the overnight cash rate.

Westpac’s rate cut to 8.56 per cent will be effective from October 13, the Sydney-based bank said in a statement.

The Commonwealth Bank of Australia’s (CBA’s) rate has been reduced to 8.53 per cent.

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