Interest rates: Which way for RBA to go on interest rates.

The RBA meets tomorrow to decide on interest rate levels in Australia

In the twelve months to March 2012 inflation has fallen below 2%, and this is seen by many to be a good indicator that the RBA will reduce interest rates by .25%

Australia has the luxury of the ability to reduce rates at least two percent if the need arose to kick-start the economy, and some are saying that the time to act is now.

The "Goldilocks inflation rate band" in Australia is 2.0% to 2.8%. Last month recorded it fell to just 0.1% [for February].

The RBA would be reluctant to move on interest rates anytime inflation is in the Goldilocks band, Between 25% and 2.8%. Now that the inflation rate has moved below that hopes are rising in the mortgage belts of Australia that the rate will be reduced, at least to compensate for the big bank rate hikes in recent weeks to fill the profit gap squeezed by Government Policies that banned many bank fees and charges.

The inflation rate was just .1% for February and that may be a trigger to get the PBA to take action.

Market view is a hold on Interest rates

On the other-hand the market view is that the RBA is more likely to stay put on interest rates, and leave the cash rate at 4.25 per cent when it meets tomorrow.
With unemployment low at at steady 5.2%, and many believing that the RBA views house prices as needing to fall further to make housing more affordable, a hold on rates is the most likely income.

So the pinch on mortgage repayments looks to continue.

If you are feeling the pinch, maybe you should look at the great mortgage rates on offer at non bank lenders. That way you will get a reduction in home loan repayments regardless on what the Reverse bank decides.
Some lenders are offering rates near 1.0% below the banks, and they don't have shareholders to satisfy

RBA keeps interest rates at 3.0 percent as Australia Economy looks solid for recovery.

Australian home owners, home buyers, new home builders and retailers and mortgage lenders appears to have escaped the recession that has swept the World, with the Reserve Bank of Australia deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June Meeting.
The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders and was widely tipped by economists.
Economists believe that the Reserve Bank is right in keeping its powder dry, in case further interest rates cuts are necessary who towards the end of the year, if in fact they are needed.
In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.
Australia's economy looking good.
"The turnaround is clearest in China and some other emerging countries," he said.
"Recovery in the major countries is likely to take longer to begin and be slower when it does occur."
Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.
"The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."
The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.
The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government's stimulus packages.
The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.

Mortgage shoppers delight in variable rate mortgages, fixed rates are for losers

Fixed-rate mortgage borrowers face hefty fees if they want to switch to a standard variable loan. A massive interest rate cut lastweek has made more than 43,000 fixed rate home loan borrowers Australia's biggest losers.
The costs of exiting an average fixed-rate mortgage jumped to $18,000 because break fees for the loan rise as interest rates fall.
Banks charge break fees to exit fixed-rate home loans so they can meet interest payment obligations to term deposit customers.
The Reserve Bank of Australia (RBA) on Tuesday announced it would slash official interest rates by 100 basis points point to a six-and-a-half year low of 4.25 per cent.
The 43,632 borrowers who opted for fixed-rate mortgages between March and August this year, when interest rates were at a decade-high peak, face hefty fees if they want to switch to a standard variable loan.
Official interest rates would have to fall to the lowest levels since February 1965 for these borrowers to recoup the cost of switching out of a fixed loan through cheaper mortgage repayments.
A borrower who took out an average $250,000 loan, fixed at 9 per cent for three years back in June, faces an $18,000 exit fee if they want to move into a standard variable loan.
Leaving an equivalent $400,000 loan would incur a $29,000 charge, according to Canstar Cannex data of exit fees charged by the major banks.
Canstar Cannex senior financial analyst Harry Senlitonga said lenders typically charged higher "break fees" to exit fixed-rate loans when official interest rates were falling.
"The more the interest rate cut, the more the break cost," he said.
"For a borrower, the question they need to ask themself is how long you have left on a fixed-rate and whether it's worth paying the fee or not."
Borrowers who took out a fixed-rate loan in August would face higher exit fees than those who took out a mortgage in March, when the RBA was still talking up inflation as its biggest worry.
Two of Australia's big four banks matched the RBA's one percentage point rate cut, which took the overnight cash rate to 4.25 per cent.
Monthly repayments on a $250,000 standard variable home loan with the Commonwealth Bank and NAB fell to $1,678 as mortgage rates dropped to 6.74 per cent.
By comparison, borrowers on an equivalent 9 per cent fixed rate loan are still paying $2,058 a month.
Switching from a $250,000 fixed-rate to a lower standard variable loan would reduce mortgage repayments by $13,680 over three years at current interest rates.
Borrowers would only recoup the $18,000 cost of exiting an average, three-year fixed-rate loan if official interest rates fell by another 75 basis points to a 44-year low of 3.5 per cent - and took standard variable mortgage rates to under 6 per cent.
After this week's rate cut, a one-year term deposit account with a rural bank was offering 6 per cent interest on $1,000, updated figures from termdeposit.com.au say.