November 2018: Interest rates on hold, Industry reaction

Yesterday (6 November 2018) the RBA Board decided to leave the cash rate unchanged at 1.50 per cent for its 24th consecutive meeting.

“Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low,” says RBA Governor Dr Philip Lowe.

“Growth in credit extended to owner-occupiers has eased but remains robust, while demand by investors has slowed noticeably as the dynamics of the housing market have changed. Credit conditions are tighter than they have been for some time, although mortgage rates remain low and there is strong competition for borrowers of high credit quality.

“The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,” he said.

The RBA will next meet on Tuesday, 4 December 2018.


“Although the cash rate remained on hold for a record 27th month, it’s important to note that mortgage rates to investors are up as much as fifty basis points over the same time frame. That’s the equivalent of two cash rate hikes, and variable rates for owner-occupiers have increased by 15 basis points over the past two months alone,” said CoreLogic Head of Research Tim Lawless.

“The rise in mortgage rates, particularly for investors who are now paying a 55 basis point premium over owner occupiers, together with tighter lending conditions more broadly, has been a key factor in taking the heat out of the housing market.

“Despite relatively strong economic conditions, with GDP running at a six-year high and unemployment at a six-year low, the recent core inflation reading was tracking at 1.7% and wages growth remains subdued. The ongoing fall in Australian dwelling values is also likely to be weighing more heavily on the RBA’s deliberations, with CoreLogic indices showing the housing market downturn is becoming more broad-based, with most regions around Australia showing a clear slowdown in growth rates, if not declining values.

“Although mortgage rates have edged higher over recent months, the cost of debt remains at the lowest levels since the 1960’s. With the cash rate remaining on hold for the foreseeable future and funding cost pressures easing, we are likely to see mortgage rates remain close to their current levels which should help to keep a floor under housing demand, especially with housing affordability now improving and labour markets strengthening.”


1300HomeLoan Managing Director John Kolenda said all signs point to the RBA leaving official rates at the all-time low of 1.5 per cent until next year and possibly 2020 with a rate cut now more likely in the long term than an increase.

Mr Kolenda said the RBA once had form for getting amongst the action on Cup Day, but it has now been eight years since the central bank lifted its cash rate on the day that stops the nation, while its last rate movement was in August, 2016.

“It’s a pretty safe bet that the RBA’s cash rate will stay at 1.5 per cent when the Melbourne Cup is next held in November, 2019,” Mr Kolenda said.

“While there are some good signs for the domestic economy with lower unemployment and more first home buyers getting back into the market, the US-China trade war, housing conditions easing in Sydney and Melbourne, uncertain household consumption and the coming federal election will all influence the RBA to maintain its watching brief.

“Lenders have already increased rates out-of-cycle so there is no need for the RBA to do anything.”

Mr Kolenda said while borrowers face a challenging lending environment, they should not be afraid to look around for the best home loan deal.

“Home loan customers should never be complacent,” he said.

“You should always be looking for the best home loan deal and lenders are competing aggressively for your business, particularly if you have a lot of equity. Contact a mortgage broker to make sure you are getting the best terms possible and save money.”


REINSW President Leanne Pilkington said said interest rates remain stalled at 1.50 per cent.

“It is unlikely that there will be any move in interest rates for the time being,” Ms Pilkington said.

“Most punters believe that if current market conditions continue, interest rates will remain as they are until at least the third quarter of 2019,” Ms Pilkington said.

The RBA cut interest rates by 25 basis points two years ago in August 2016 as well as May 2016. There were no changes to interest rates in 2017.


Sally Tindall, Research Director at RateCity,  said it’s incredible to think there is a now a generation of first home buyers who’ve never experienced an RBA rate hike.

“Eight years is a long time between increases. Interestingly, the average home owner is paying less per month on their mortgage repayments now – but only marginally,” she said.

“The RBA is unlikely to hike rates in the near future, but that doesn’t mean people should become complacent about paying down their debt.

“Keep an eye on your rate and shop around to see what other lenders are offering. The banks are desperate for new business, particularly as their profit margins are squeezed which is a win for borrowers.”

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