Another interest rate cut to help boost spending

The Reserve Bank will most likely drop interest rates by another one percent next month giving households an early Christmas gift.

By lowering interest rates to 4.25 percent - will provide us with the lowest rates in seven years. On a standard variable loan of $300,000 it would save households up to $200 on their monthly repayments, which the Reserve Bank is hoping consumers will go out and spend, and ward off a recession.

The Reserve Bank has cut 2 percent off official interest rates over the past three months, reducing the monthly repayments on an average standard variable mortgage by $376.

The down side for households is that wealth has dropped by more than 8 percent since the start of the year eliminating about $32,000 assets on average family homes, shares and savings.

Retailers are worried that shoppers may not spend their bonuses and one-off pension payments, which are due to be distributed early next month.

Some leading economists predicted that interest rates could fall as low as 3.5 percent by mid-next year.

Despite the prediction that there will be another 110,000 job losses over the next 12 months, the Government is hoping that the rate cuts and extra cash being paid to low income families will keep the economy out of recession.

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Published on November 11-th, 2008 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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