Yesterday (4 September 2018) the RBA Board decided to leave the cash rate unchanged at 1.50 per cent for its 23rd 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.
“Housing credit growth has declined to an annual rate of 5½ per cent. This is largely due to reduced demand by investors as the dynamics of the housing market have changed.
“Lending standards are also tighter than they were a few years ago, partly reflecting APRA’s earlier supervisory measures to help contain the build-up of risk in household balance sheets. There is competition for borrowers of high credit quality,” he said.
The RBA will next meet on Tuesday, 2 October 2018.
REALESTATE.COM.AU
“The decision follows in the footsteps of smaller banks and lenders moving out of step with RBA and raising their rates, including Macquarie, Bank of Queensland, Suncorp and ME Bank, which provides even less reason for RBA to raise the cash rate because the banks are already slowing down the economy by doing that,” said REA Group Chief Economist Nerida Conisbee.
“The banks are increasing their interest rates because Australians borrow more than they save, so the banks have to borrow money from overseas to cover their costs,” she said.
“The RBA says the next move will be up, but it’s taking a long time for the economy to be strong enough.
“Consumers aren’t spending enough, aren’t getting the salary increases they want. Business confidence is up but consumer confidence is still low.
“Rates in places like the UK and US are on the increase, but Australia is stable and not moving,” she said.
CORELOGIC
“With the first of the Big Four banks announcing an out of cycle rate hike, the prospects for a higher cash rate have likely been pushed back even further; we could even see debate for a lower cash rate becoming more prominent,” said CoreLogic Head of Research Tim Lawless.
“Plenty of slack remains in the labour market, housing prices are trending lower, household debt levels are at a record high, core inflation is tracking below the RBA’s target range of 2-3 per cent and retail trade is slow. With all this in mind, financial markets are betting the cash rate will stay on hold until at least January 2020.
“Despite the outlook for a stable cash rate, but slightly higher mortgage rates, we can expect lenders to remain hyper-competitive, particularly for high-quality borrowers – those with large deposits, lower debt to income ratios and a strong credit history. Even with mortgage rates starting to edge higher, from a historical perspective rates remain extremely low which will continue to support housing demand. No doubt borrowers will be applying pressure on their lenders to ensure they are on the lowest rate possible.”
1300HOMELOAN
1300HomeLoan Managing Director John Kolenda said the rate increases independently of the central bank, due to cost of funding pressures, has given the RBA no choice but to remain a long-term bystander and maintain its cash rate at the all-time low of 1.5 per cent.
“The increases in rates independently of the RBA means the official rate will be staying on hold, with a future downward movement from the central bank now much more likely than a rate hike,” Mr Kolenda said.
He added that, despite the cash rate being maintained at record lows, borrowers have been facing significant challenges in the tough lending environment.
He said while the lending landscape was confusing there was still intense competition for business between lenders.
“It’s more important than ever, though, for mortgage holders to be on top of their home loan, and with the expert assistance of a mortgage broker they can make sure they are getting the best deal possible,” Mr Kolenda said.
“The main message in the current climate is not to be complacent about your home loan. Don’t become a mortgage prisoner. Seek advice from a mortgage broker to make sure your loan is working for you.”
REINSW
REINSW President Leanne Pilkington said there’s significant rate movement irrespective of the RBA at the moment.
“There is no compelling reason for the RBA to adjust the office cash rate at this time,” Ms Pilkington said.
“Of greater interest is the approach the banks are taking with their lending terms. Honeymoon interest rate deals are in vogue to attract first home buyer attention, but it’s necessary to crunch repayment numbers based on the actual rate you’ll be paying once the honeymoon is over.
“On the flipside, Westpac’s pre-emptive strike to lift rates, and the subsequent ‘please explain’ demanded by the new Treasurer, is cause for concern,” Ms Pilkington said.
RATECITY
Sally Tindall, Research Director at RateCity, said the RBA has left the cash rate on hold at 1.5 per cent today, which comes as little surprise to the market.
“With the cash rate still at an historical low, property prices coming off the boil in some cities and investors dipping out, there’s a real opportunity for first home buyers to get into the market,” she said.
“There are a couple of things they can do to maximise their chances of getting a home. They include saving a big enough deposit to avoid paying lenders mortgage insurance and taking advantage of the first home buyer grants and stamp duty exemptions in their state.”
