November 02, 2021
The Reserve Bank of Australia (RBA) has decided it will keep the nation’s official cash rate on hold at 0.10% at its November monetary policy meeting.
Speaking about the decision, CEO of Mortgage Choice and Smartline, Susan Mitchell said, “The nation’s ongoing economic recovery and strongest inflation reading in six years has pushed the Reserve Bank board to discontinue the yield target.”
“The Bank’s decision to unwind its previous guidance certainly impacts home loan interest rates. However the extent remains to be seen, noting that the central forecast for underlying inflation to be no higher than 2 ½ % at the end of 2023 with only gradual increases in wages growth. This is likely to keep the property market buoyant throughout next year,” said Ms Mitchell.
REA Group director of economic research, Cameron Kusher said, “the RBA seemingly abandoned its 3-year Government bond target, which saw bonds shift much higher than their 0.1% target. The repercussions of this for housing is that interest rates, particularly new fixed rates, may see further increases over the coming weeks and months.”
Ms Mitchell said, “We’ve already started seeing a lot of small rate tweaks on home loan interest rates, mainly on long-term fixed rate home loan products and some discounting on variable rate home loans, but today’s announcement suggests that more significant changes are on the horizon.”
“These changes in the market haven’t gone unnoticed by Mortgage Choice customers. Borrowers have been responding by fixing part or all of their home loan interest rate. Mortgage Choice home loan approval data shows that 40.8% of loans had a fixed component in the month of October 2021 and there continues to be strong demand for refinance with the data revealing 38% of loans to owner-occupiers being for refinance purposes.”
“I strongly encourage all borrowers who haven’t had their home loan reviewed in over 12-months to make an appointment with their local broker as soon as possible. We’ve experienced an extremely low interest rate environment over the last few years but cheap rates aren’t here to stay. Borrowers who aren’t on the lowest rate they can access already should speak to a broker and prepare for eventual rate rises,” concluded Ms Mitchell.