Interest Rates staying put
The Reserve Bank of Australia (RBA) has announced its monthly cash rate call, holding the rate at 1.5% for the 10th month in a row.
This result was widely predicted with all 33 economics experts polled by finder.com.au and over 90% of mortgage brokers surveyed by HashChing forecasting a hold call.
While it was expected that rates remain steady for now, CoreLogic head of research Tim Lawless said that financial markets are leaning towards a cut in the future.
“One of the key barriers to rate cuts – the hot housing markets of Sydney and Melbourne – has shown signs of slowing.”
Although CoreLogic had only reported one month of negative dwelling value movements so far, a more sustained trend could mean the RBA considers alternatives to keeping rates on hold, he said.
When rates were cut last in May and August 2016, the housing markets boomed with capital gains increasing and investor numbers surging, Lawless added.
“The situation is very different now, with new macro-prudential regulations dampening investment demand while mortgage rates have stepped higher, particularly for investors and interest-only borrowers.”
This means the housing market will be subject to further scrutiny over the coming months, particularly in Sydney and Melbourne where dwelling figures have risen by around 75% and 55% respectively over the past five years.
“A longer trend of slowing value growth and overall softer housing conditions will lend further support to the notion that house price growth has moved through its cyclical peak and may take some pressure away from the RBA to keep rates steady especially given that other sectors of the economy other than housing seem to need interest rates set at a lower level to what they currently are.”
John Flavell, CEO of Mortgage Choice, also said the RBA’s decision was no surprise.
“Today’s announcement is simply a case of: another month, another unsurprising cash rate decision from the Reserve Bank of Australia.”
He pointed to strong economic conditions which encouraged the RBA board to maintain its current stance with robust levels of consumer sentiment, high levels of business confidence and falling unemployment rates.
“When you combine all of these factors, it is little wonder why the Reserve Bank choose to leave the official cash rate on hold for another month,” he said.