Show Them The Money

The Age

Saturday August 16, 2008

Enzo Raimondo, chief executive REIV, The Standard for Success

Banks and lenders should pass on any interest rate cuts to borrowers.

The Real Estate Institute of Victoria supports the recent calls by the Federal Treasurer for banks and other financial institutions to immediately pass on to mortgage holders any reductions in interest rates by the Reserve Bank.

Over the past six years the Reserve Bank has lifted the official interest rate 12 times taking the rate from 4.25% in April 2002 to the current rate of 7.25%. Recently, banks have also increased interest rates on top of the RBA increases.

As a result of the increases, the standard comparison rate is now between 9% and 10% - double the rate of six years ago.

The interest rate increases have required many borrowers to make changes to household budgets and spending. These rising payments have also coincided with fluctuating petrol prices and rising grocery prices.

These factors combined have contributed to a softening of the housing market with a reduction in the number of sales and a stabilisation of price throughout the first half of 2008.

Many economic indicators, including the REIV's June Quarter data show that the Reserve Bank's monetary policy decisions are having an effect, the result being an economic slowdown.

A reduction in the official cash rate, if passed on to mortgage holders by banks and other financial institutions, would help alleviate some of the financial stress households are experiencing and provide mortgage holders and future first-home buyers with some respite.

A lower interest rate would also help stimulate investment in the private rental market. This would provide prospective tenants with more choice and stabilise rents.

-- Enzo Raimondo, chief executive officer

© 2008 The Age

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