Feb 2018: Interest rates on hold, Industry reaction

The RBA has left the cash rate on hold in their first board meeting for 2018, deciding at their first meeting of the year to leave the cash rate unchanged at 1.50 per cent.

RBA Governor Dr Philip Lowe noted while inflation remains low globally, higher commodity prices and tight labour markets are likely to see inflation increase over the next couple of years.

“The Bank’s central forecast for the Australian economy is for GDP growth to pick up, to average a bit above 3 per cent over the next couple of years,” Lowe said.

The RBA will next meet on Tuesday, 6 March 2018.


REINSW President Leanne Pilkington welcomed the decision to keep interest rates steady at the February 2018 board meeting held today.

“The most recent data indicates house price growth has slowed in the major capital city markets, reinforcing a wait-and-see approach from the RBA,” she said.

“The regulator’s efforts to dampen activity appear to be working, with tighter lending criteria having the desired effect.

“Though it’s worth remembering that a pronounced decline in house prices will impact consumer confidence, so the situation is delicate.

“Based on current conditions, we expect there won’t be a rise in interest rates until next year,” Ms Pilkington added.


“Slow wage growth and sluggish inflation is likely to keep the RBA on the sidelines but that doesn’t mean homeowners can sit back and be relaxed and comfortable,” said 1300HomeLoan Managing Director, John Kolenda.

“Complacency could cost mortgage holders thousands of dollars and in the current climate it’s pertinent for home owners to seek expert advice from a mortgage broker to secure the best interest rate possible and save money.

“With a slowing mortgage market, some lenders have cut rates to attract new borrowers. The competition will heat up and see more pressure on reducing rates by lenders to curb a slowdown in anticipated volumes.”

Mr Kolenda said the RBA maintaining its holding pattern on official rates has provided much-needed stability for mortgage holders during challenging economic times.

“A generation of mortgage holders hasn’t experienced a hike in official interest rates as it has been more than seven years since the last increase in the cash rate,” Mr Kolenda said.

“We hope the central bank maintains its highly cautionary approach and any potential rate rises down the track are at a miniscule amount and over a protracted period to avoid causing unnecessary panic among mortgage holders unaccustomed to increases.”


RateCity says the recent RBA decision doesn’t mean home owners should accept their current rate. New research from shows that some of the lowest rates on the market are being reserved for mortgage holders who already have sizeable amounts of equity in their property.

Mortgage House, for example, is currently offering a rock-bottom rate of 3.44 per cent with one catch – you need to already own at least 70 per cent of your property.

RateCity money editor Sally Tindall said lenders were on the hunt for ‘ideal borrowers’ – owner occupiers with decent deposits of at least 20 per cent.

“Borrowers who have benefited from the property boom are in the drivers’ seat when it comes to rates,” she said.

“The banks want you to have some skin in the game. If you own more than 20 per cent of your property, you’re holding a powerful bargaining chip,” she said.

“Find out what other lenders are offering new customers, then pick up the phone to your bank and ask them for a lower interest rate.


“The continued environment of remarkably low-interest rates is very beneficial for renters,” commented Shane Garrett, Senior Economist for the HIA.

“Last week’s inflation figures from the ABS showed that the pace of rental growth reached a 24-year low during 2017,” added Mr Garrett.

“This is partly due to the large volume of newly-built dwellings that have arrived on the rental market over recent years.

“Mortgage interest costs also have a big impact on rents. The fact that interest rates have been so low and so stable over the past two years has taken the pressure off rents.

“During 2017, rents increased by just 0.6 per cent – the slowest pace of growth in any year since 1993.

“Owner-occupiers have reaped the rewards of declining interest rates over the past six years. Last week’s figures show that those relying on the rental market for their housing needs are also benefitting,” concluded Shane Garrett.


“Today’s rates decision is the 16th consecutive hold by the Reserve Bank, yet we’ve seen a flurry of lenders bucking the trend by slashing variable interest rates in recent months,” says Director Kirsty Lamont.

“With housing prices in some of the nation’s capital cities continuing to slide, competition in the home loan market is intensifying as lenders try to ramp up their loan books.”

The average cut for an owner-occupier variable rate loan is 20 basis points. However, investors paying principal and interest repayments enjoyed the biggest discount from lenders, with an average cut of 33 basis points.

“There have been more cuts to variable rates for investors in recent months than we’ve seen in well over a year,” says Lamont.

Despite the winding back of investor rates, Mozo says it’s owner-occupiers that banks are chasing the hardest right now.

“Several lenders are looking to entice owner-occupiers and, in particular, first homebuyers with sharply priced home loan deals ahead of autumn property season. For instance, Commonwealth Bank recently launched a new 4-year variable introductory offer specifically for first home buyers with a headline rate of 3.79%.”

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Shantelle Isaaks

Shantelle Isaaks was the marketing assistant for Elite Agent and Elite Property Manager Magazines from 2016 to 2018.