At its meeting today, the RBA Board decided to leave the cash rate unchanged at 1.50 per cent.
“The housing markets in Sydney and Melbourne have slowed. Nationwide measures of housing prices are little changed over the past six months, with prices having recorded falls in some areas,” says RBA Governor Dr Philip Lowe.
“In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years.
“APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high.”
CORELOGIC
Housing market conditions are likely to be moving further down the RBA’s list of priorities, considering the market is showing every sign of moving through a soft landing, with the pace of value decline easing over recent months,” says Tim Lawless,
“The controlled slowdown in the housing sector is likely to be a welcome outcome from the RBA, who are more likely to be focussing on labour markets, where the rate of unemployment, although lower than a year ago, crept higher, from 5.4% to 5.5% in February.
“With some slack in labour markets, wages growth remains close to record lows, which is keeping a lid on inflation and household consumption. National dwelling values were flat last month, however, six of the eight capital cities saw dwelling values slip lower in March, albeit at a reduced rate of decline relative to other months.
“Despite the hold decision from the RBA, mortgage rates remain close to historic lows, particularly for owner-occupiers who are paying down both their interest and principal. Investors are facing a mortgage rate premium of around 60 basis points, but relative to long-term averages, their mortgage rates are low.”
REALESTATE.COM.AU
“The economy still isn’t strong enough to handle a rate rise. Although businesses are confident, consumers are still not getting the wage rises they need to feel more confident. This is impacting retail trade,” says Chief Economist Nerida Conisbee.
“Although some commentators can’t see one happening for 18 months or longer, my view is that conditions will move quickly once wages start increasing. A similar situation happened in the US – once the economy got moving, it fired up very quickly.
“Although banks are under pressure to increase rates (costs of wholesale funding are increasing), many are cutting because the market has slowed. They are taking a cut on margin to keep up volumes. This is good news for borrowers.
“Conditions are good for first home buyers. In many states, first home buyer grants have been ramped up however the bigger impact is that investors are less active this year. With fewer investors, this means less competition for first home buyers as both groups tend to target similar properties
“Australia has the second highest household debt to GDP ratio in the world. There is no doubt that some people are highly indebted. The RBA and banks will, therefore, move very carefully to ensure that there are not high levels of defaults.
“As interest rates rise, however, high-risk borrowers are the most likely to default – this includes people who have taken a lot of debt on multiple investment properties and older investors.
“For owner-occupiers, job loss would be a far bigger determinant of default however at this stage, the Australian economy is moving into growth mode and this support jobs growth and wage rises, both of which will support the ability to pay off loans,” she said.
REINSW
REINSW President Leanne Pilkington said it was unlikely that interest rates would change in the foreseeable future.
“The residential housing market, and the economy generally, requires the steady interest rate environment to continue,” Ms Pilkington said.
“Employment growth has been encouraging but tempered by flattened wage growth, while house price growth is also subdued and clearance rates are solid if unspectacular.
“It amounts to a prudent case of the RBA leaving rates as is,” she said.
1300HOMELOAN
1300HomeLoan Managing Director John Kolenda said in another sign of confusion for home loan customers, some lenders have warned their home loan rates could rise due to cost of funding issues.
“While the RBA looks like keeping its cash rate on hold, there are some lenders facing increases in the cost of their wholesale funding which they blame on the impact of US economic policies,” he said.
“They have already lifted rates for business loans and have warned they may have to also pass on these increases to home loans.”
Mr Kolenda said the chaotic lending landscape made it imperative for mortgage holders to stay on top of their home loan situation and seek the best advice.
“Home loan customers will be costing themselves thousands of dollars by being complacent and not consulting an expert mortgage broker to make sure they can get the best deal on their mortgage in the current environment,” he said.
“While it may be confusing for borrowers with a host of home loan products and variations in interest rates, it’s still a highly competitive lending market and pertinent for home owners to seek expert advice to navigate this minefield.”
RATECITY
RateCity.com.au spokesperson Sally Tindall said first home buyers and pensioners were among the hardest hit by the record low cash rate.
“The harsh reality is, most savings accounts don’t even match inflation these days, which makes shopping around all the more important.
“The first trick to picking a savings account is to understand the types of rates on offer. Bonus rates that offer high rates look good on paper but when you scratch the surface you’ll discover the interest plummets after three or four months.
“Look for a savings account that offers a decent rate on an ongoing basis. While these accounts usually have some conditions attached – such making regular deposits – if you can meet these requirements you’re likely to be better off in the long run.
“Whether you’re an avid saver or someone who just wants a place to stash your spare change, it’s worth comparing your savings account at least once a year.
“Tax time is often a moment of truth for savings accounts as people tally up how much interest they’ve earnt. You might find your savings report card isn’t quite hitting the A+ average you were hoping for,” said Ms Tindall.
HOUSING INDUSTRY ASSOCIATION
“The Reserve Bank of Australia today left the official cash rate at 1.50 per cent – for a record 19 consecutive months and it seems it won’t change soon”, said the HIA’s Principal Economist, Tim Reardon.
“As noted by the RBA Governor, the housing markets in Sydney and Melbourne have slowed. In fact house prices fell in the first quarter of 2018 in all capital cities, except Hobart.
“Sydney house prices are now 2.1 per cent lower than they were a year ago as a consequence of the supply of housing temporarily rising to meet demand.
“The decline in investor activity in the market is also a direct consequence of APRA intervention into the market in April 2017.
“The market is already cooling and this is not the time to expose the market to higher interest rates, or heavier taxes through changes to negative gearing”, concluded Mr Reardon.
