Interest Rates and Beyond
The Reserve Bank of Australia has made it two consecutive months of inaction for Australia’s official cash rate.
In what was a widely predicted outcome, today’s RBA board meeting ended with the cash rate remaining at 1.5%, the same outcome that occurred after September’s board meeting.
Despite it having a number of factors to weigh up in making the decision, CoreLogic head of research Asia Pacific Tim Lawless said today’s decision is unlikely to come as a shock.
“After two rate cuts earlier in the year, the Reserve Bank’s decision to hold the cash rate at their historically low level of 1.5% came as no surprise,” Lawless said.
“Housing market conditions were almost certainly one of the topics discussed at the board meeting, as well as the stubbornly high Australian dollar, an inflation rate that is well below the target range of 2-3% and a remarkably strong rate of GDP growth released for the June quarter,” he said.
In terms of the housing market, Lawless said the RBA is likely comfortable with indications price growth is slowing. CoreLogic figures shows combined capital city prices grew at 7.1% in the year to September, which is significantly slower than the growth seen over the previous 12 months.
“A year ago capital city dwelling values were rising by 11% per annum. Importantly, while growth conditions in the housing market have slowed.” Lawless said.
Lawless said supply levels and worsening affordability will likely continue to drag on price growth in the near future, however there are indications investors are becoming more active and the RBA is unlikely to make any decisions that results in price growth speeding up.
“Clearly, the housing market is diverse and low interest rates are only one factor that is influencing conditions. The RBA is likely to be monitoring the housing market closely, looking for any signs of accelerating capital gains in the larger markets, or a ramp up in speculative investment activity,” Lawless said.
Whilst 33% of brokers are suggesting a rate cut towards the end of this year – we think it is likely to remain much the same. And remain the same for some time. So our suggestion at the moment is either stay variable or if looking at fixing – perhaps split your loans and hedge your bets. Though fix for the shorter time, so that loan is coming up for renewal before rates are on the increase. At that stage talk to us again to see what the market is doing. Perhaps at that point fix for the longer term to get your through the rising market. Although you need to make sure the fixed term is in line with your life plans – Fixed rate home loans can be expensive to change your mind!
We are always here to run numbers and do a health check on your existing mortgage. Contact me on mobile 041890354 or email donna-lee@celsiusfinance.com.au