Rates headed down to 3 per cent next year

Markets are pricing in rate cuts to take the official rate to 3.75 per cent over the next six months. Yesterday the Reserve Bank made a bigger than expected 0.75 per cent cut to official rate to take the official interest rate to 5.25 per cent. If passed on in full by banks, the average standard variable mortgage rate will fall to about 7.6 per cent, saving borrowers about $156/month. Commonwealth Bank yesterday lowered its mortgage rate by 0.58 per cent to 7.74 per cent. Morgan Stanley said yesterday that Australia was heading for recession which would cause the RBA to lower interest rates to three per cent next year.

Source: The Australian