The decision was widely anticipated and it is the 13th month in a row the cash rate has not moved from 1.5 per cent.
In a statement accompanying the decision, RBA Governor Philip Lowe said the construction boom seems to have reached its peak.
“Residential construction activity remains at a high level, but little further growth is expected,” Dr Lowe said.
“Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney. In some other markets, prices are declining,” he added.
The RBA will next meet on Tuesday, 3 October 2017.
Here’s what the industry had to say about the decision:
REINSW President John Cunningham
REINSW President John Cunningham said it appears that interest rates are now unlikely to change before the end of the year.
“The RBA is walking a fine line and the banks continue to wield strong influence,” Mr Cunningham said.
“Listing volumes are up across most markets and strong sales are happening soon after auction.
“While every boom comes to an end, the market peaked in April and has subsequently stabilised. Buyers and sellers should expect a buoyant and active spring season and then a few years ahead of more modest capital growth.
“Buyers must prepare themselves for interest rate rises in the future, but any movement seems unlikely to happen until next year,” Mr Cunningham said.
Housing Industry Association – Principal Economist Tim Reardon
“With muted inflationary pressures and mixed demand conditions it is unlikely the Cash Rate will change in 2017.
“There is nothing in the Governors statement today, or in recent housing indicators, to suggest that interest rates need to increase anytime soon. Comments issued by the Reserve Bank Governor today confirmed that the indicators in the housing market vary considerably around the country. This is demonstrated in recent housing price indicators and building activity that show some regions remain strong while others have cooled.
“Residential building activity is now starting to contract having been a key driver of growth up until recently. New dwelling commencements peaked in the March 2016 quarter and remain relatively high.
“The RBA correctly notes that investors in residential property are facing higher interest rates. There are also additional restrictions on foreign investors which could have a negative impact on the building industry. These factors are impacting the industry at a time when it is has commenced a downward cycle.
Mortgage delinquency in Australia remains very low, but growth in housing debt has been outpacing growth in household incomes. For these reasons, Australia’s economy will continue to require low interest rates in order to achieve stronger growth over the medium term.”
Laing+Simmons – Managing Director Leanne Pilkington
“The reasonably strong Aussie dollar, encouraging employment figures and credible results from the reporting season all point to a steady economy, leaving little impetus to tinker with the cash rate at this time.”
“Steady low rates continue to support steady transactional activity in the housing market.
“Good quality properties offered with reasonable price expectations have ticked over through the winter months and now the spring selling season is underway, we’re expecting to see a mild increase in the amount of properties coming to market.
“In terms of the property cycle, it appears the balance of power between buyers and vendors has levelled from previous years, with buyers exercising greater discretion but the ongoing supply shortage still underpinning vendor confidence.
“Against this background, we think the hold pattern remains appropriate at this time.
“But buyers and mortgage holders can expect the next move in rates to be upward. For anyone anticipating that a rise in rates, perhaps as soon as 2018, will put undue pressure on their capacity to meet repayments, perhaps now is the time to crunch a fresh set of numbers.”
Rate City
The cash rate remained steady for the 13th month in a row however home loan rates continue to diverge as banks keep up with increased regulation.
Four distinct loan tiers have emerged as a result of APRA’s requirements, and RateCity research shows with significantly lower rates for owner-occupiers and people opting to pay principal and interest.
The spread between the tiers is now 65 basis points.
Average home loan rates:
Owner-occupiers, principal & interest: 4.35%
Owner-occupiers, interest-only: 4.58%
Investors, principal & interest: 4.79%
Investors, interest-only: 5.00%
RateCity money editor Sally Tindall said traditional home owners have been the big winners.
“Australians opting to live in their properties and pay down their debt can nab a rate as low as 3.44 per cent.
“Investors on the other hand are hard-pressed to find anything under 4 per cent.
“While there are 510 owner-occupier loans under 4 per cent, investors have just 49 to choose from.
“Those who have stuck it out with investor interest-only loans have, on average, copped a 40-basis point rise over the last 12 months, adding $116 per month to the cost of a $350,000 mortgage.
“All of this, as the cash rate remains on hold. It shows when it comes to monetary policy, the Reserve Banks isn’t pulling all the strings,” said Ms Tindall.
Lowest investor principal and interest rates:
Reduce Home Loans, Investor RateBuster (P&I): 3.74%
Homestar Finance, Investment loan (P&I) 3.79%
Pacific Mortgage Group, Investment loan (P&I) 3.79%
Lowest investor interest-only rates:
Homestar Finance, Investment loan (interest-only): 3.94%
Reduce Home Loans, Investor RateBuster (interest-only): 4.04%
Pacific Mortgage Group, Investment loan (interest-only): 4.09%
