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RBA

The Reserve Bank of Australia has left interest rates on hold at 2.5 percent at its November board meeting today.

The official cash rate, which is already at a record low, was last cut in August, when it was slashed by 25-basis-points .

The central bank has steadily reduced the cash rate since early November 2010 when it was 4.75 per cent.

The RBA has previously signalled it would be willing to sit on the sidelines for at least another month as it waits for further evidence that previous rate cuts were sufficiently stimulating the economy.

HSBC chief economist Paul Bloxham says improved business and consumer confidence, as well as strong rises in house prices, means the RBA has finished its rate cutting cycle.

"The RBA is unlikely to deliver any more rate cuts for fear of over inflating the housing market," he said.

"Housing price growth has risen and timely auction market data suggest these trends have continued in recent weekends, despite a pickup in supply on the market.

Alex Parsons, CEO of RateCity.com.au, said for a typical $300,000 home loan repaid over 25 years at the average basic variable interest rate of 5.19 percent, that’s equivalent to having a repayment buffer of $35,740 up their sleeves.

"When rates drop you can lower your repayment amount and pocket the extra savings. But if you put it back into your home loan, not only will you build a buffer and pay your mortgage off sooner, it won’t be so much of a burden when rates eventually do go back up," he said.

The RBA has slashed the cash rate by two per cent to a record low of 2.5 per cent in a series of reductions over the past two years.

Most economists believe the RBA will start increase its interest rate in late 2014 or early 2015.

Story by AA, Story source: www.ninemsn.com.au

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