At its meeting today, the RBA Board decided to leave the cash rate unchanged at 1.50 per cent.
“More indicators are pointing to improving economic conditions and given how fast the US is growing, this will support our economy,” says Nerida Conisbee, realestate.com.au Chief Economist.
“The main thing holding them (RBA) from increasing rates are consumers, in particular the enduring impacts of low wages growth. Once wages start to increase again, it will further strengthen the need for a rate rise.”
“Inflation has been low for a long time, which is why rates haven’t moved. In 2015 and 2016 we were well below the target range though, so it is an improvement from then.”
“The RBA has very little control over US rate rises and these have the potential to dramatically increase this year. Part of this will be passed on to Australian mortgage holders. Given how high debt levels are, it may not take much for some people to go into housing stress.
“Others, who bought early, paid down debt and have benefitted from increasing asset prices, are in a very different situation.
“Banks are very dependent on mortgage lending and if interest rates increase to such an extent that people start defaulting on loans, it will put them in a difficult position. Similarly, given how much profit has been derived from mortgage customers, a slow down in the housing market will impact their revenue significantly.
“We are now at the end of a low interest rate environment. It has driven the share market volatility of recent months and is a very different situation to what a lot of people have become accustomed to.”
REINSW President Leanne Pilkington said the current interest rate remains appropriate.
“The fact that the banks themselves are applying tighter lending criteria to their customers demonstrates the potential impact a rate rise too soon may have.
“It’s a precarious position requiring a steady environment in the near term and under the current conditions we don’t expect any movement until 2019,” Ms Pilkington said.
“We have now gone 19 months without any change from the RBA and the current governor of the central bank, Philip Lowe, hasn’t moved the cash rate since he took on the job in September, 2016,” said 1300HomeLoan Managing Director, John Kolenda.
“The RBA’s inaction has provided much-needed stability for mortgage holders.”
Mr Kolenda said comments from the Australian Prudential Regulation Authority (APRA) chairman Wayne Byres indicating the 10 per cent cap on growth in bank lending to housing investors could be lifted was more good news for mortgage holders.
“The removal of the cap could put downward pressure on mortgage rates for investors and increase competition among lenders,” he said.
“Home loan customers will be costing themselves thousands of dollars by being complacent and not taking advantage to seek the best deal they can get on their mortgage in the current environment.
“It’s pertinent for homeowners to seek expert advice from a mortgage broker to secure the best interest rate possible and save money.”
RateCity.com.au’s money editor Sally Tindall said the tide was turning for interest-only lending.
“It’s been a tough year for homeowners looking for interest-only lending who have had to endure at least one, if not multiple, out of cycle rate hikes,” she said.
“This is the first sign of a reprieve.
“These rate cuts suggest banks are looking to accept more interest-only loans on their books after overshooting on APRA’s 30 per cent cap on new interest-only lending.
“The latest APRA data shows the number of new interest-only loans from authorised deposit-taking institutions dropped from 36.26 per cent in March 2017 to 16.91 per cent in September 2017.
“Interestingly, CBA has reversed their 2017 rate hikes on their 2-year fixed interest-only loan, so it’s now the same rate as it was in February of last year.
“Those lenders who have room to move in their interest-only lending limits are likely to join in on these interest-only rate cuts,” Ms Tindall said