February 02, 2021
The Reserve Bank of Australia (RBA) has today made the decision to maintain the cash rate target at 0.10% at its February monetary policy meeting.
Speaking about the decision, Susan Mitchell CEO of Mortgage Choice said, “The Reserve Bank Board’s decision to start 2021 by keeping the cash rate on hold follows a raft of positive economic data.”
“The housing market continues to show strong demand. Data published this week revealed that 2020 ended with record home loan demand, and strong activity in the housing market is driving values further up.”
“Constrained supply continued to fuel a rise in house prices in January. According to CoreLogic’s Hedonic Home Value Index, national dwelling values rose 0.9% over the month, supported by a rise in every capital city. Remarkably, the Index showed that housing values have surpassed pre-COVID levels and the index is higher than the previous September 2017 peak.”
“Data from the Australian Bureau of Statistics suggests the momentum is set to continue in the housing market. Housing finance data revealed December approvals jumped 8.6% and were up 31.2% on the year prior. Owner-occupiers and, more specifically, first time buyers fueled demand for home loans in December.”
Ms Mitchell said she does not expect the cash rate to rise for at least three years, given the latest inflation and labour market data.
The ABS revealed a 0.9% lift in the December quarter CPI, driven by the surge in housing demand. Meanwhile, ABS labour force data showed an improvement in the nation’s unemployment rate. That being said, the majority of the gains in employment were for part-time work.
Ms Mitchell said, “As the Australian economy continues to strengthen and interest rates remain at record lows, the outlook for activity in the housing market remains strong.”
“For those in a position to buy their first home, or upgrade their family home, now is a great time to lock in historic low interest rates.”
“We also continue to see cashback offers from a range of lenders competing for market share. I urge borrowers looking to snag a better interest rate and cash back to speak to an experienced mortgage broker to put their best foot forward when making the switch. The fact is we are currently seeing record home loan volumes, which are being fuelled in part by cashback offers resulting in the longest loan turnaround times in the last three years. To navigate through these delays and pick the right lender for your needs, it pays to speak to an expert broker,” concluded Ms Mitchell.