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RBA Leaves Rates On Hold

interest ratesThe board of the Reserve Bank of Australia has left the official cash rate at 4.25 percent for the second month in a row.

The move was widely expected with inflation at the bottom of the RBA’s target band of 2-3 percent and global economic conditions improving.

However, the news may not be met with the rapturous receptions of the past with many lenders now lifting their rates independently of the RBA.

"The rates that borrowers pay have been creeping away from the Reserve Bank’s cash rate movements since the global financial crisis," RateCity CEO Damian Smith said.

"Last month proves that all variable rate mortgage holders are vulnerable to rate hikes, regardless of what the RBA does."

The central bank left rates on hold last month but that didn’t stop the big four, ANZ, Commonwealth Bank, NAB and Westpac from lifting their standard variable mortgage rates between 0.06 and 0.10 percent.

Westpac-owned St George went even further by hiking their rates by 0.12 percent.

The RBA was expected to ease rates last month but shocked observers when it left the rate unchanged, citing the resilient domestic economy and improved global outlook.

The decision not to move rates suggested the RBA had confidence in the local economy, buoyed by low unemployment and continued demand for labour.

However, the new dynamic the banks have set up by raising rates independently of the RBA mean borrowers could be hit by a rate rise at any time.

"Borrowers should expect frequent small changes in rates, perhaps as often as every month," Mr Smith said.

Source: www.ninemsn.com.au

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