July 07, 2020
The Reserve Bank of Australia (RBA) has today made the decision to keep the nation’s official cash rate on hold at 0.25% at its monetary policy meeting.
Mortgage Choice Chief Executive Officer, Susan Mitchell said, “There were no surprises at the Reserve Bank's July monetary policy meeting, with board members opting not to shift the nation’s official cash rate from its effective lower bound of 0.25%."
“RBA board members have indicated that the next move for the cash rate will likely be up, however this is a long while off. In the meantime, the historic low cash rate continues to support an extremely low cost of borrowing, which is supporting activity in the home loan market."
“Lenders have been pulling out all stops to compete for market share and over the last few months, we have seen cash back offers and interest rates lowered across both variable and fixed rate home loan products. This fierce competition has encouraged a vast number of borrowers to switch their home loan providers and refinance their loans."
“The uncertainty created by the current economic downturn and the historic low fixed interest rates on offer are urging more borrowers to fix their home loan interest rates. Mortgage Choice data shows that 33% of borrowers opted to fix either part or all of their home loan interest rate in the month of June, up from the three month average of 14% to February, 2020” said Ms Mitchell.
The Westpac-Melbourne Institute Index of Consumer Sentiment rebounded in May to around pre-COVID levels, as a response to Australia’s success in controlling the pandemic, however a second outbreak of the virus in Victoria may stifle the recent improvement in confidence. NAB’s Monthly Business Survey revealed that business conditions and confidence improved in May but remain deeply negative.
“The current economic climate is weighing on the nation’s housing market, with dwelling values recording a second consecutive month of decline. CoreLogic’s Hedonic Home Value Index revealed that national housing values fell 0.7% over June. There are significant headwinds facing the housing market however Government stimulus like the First Home Loan Deposit Scheme and the HomeBuilder grant may buoy activity in the property market in the medium- term.”
The latest labour market data from the Australian Bureau of Statistics (ABS) revealed a further deterioration of the unemployment rate, with the seasonally adjusted rate rising to 7.1% in May 2020.
Ms Mitchell said, “Given the outlook for the labour market is bleak, all eyes are on the Federal Government to see whether it decides to extend JobKeeper payments beyond the September deadline.
“Unless we see a dramatic change in economic indicators, we can expect to see the Reserve Bank’s policy setting to remain in place for a long time. My advice to borrowers and prospective buyers alike would be to speak to a mortgage broker to help navigate the current landscape.
“There are plenty of opportunities for buyers looking to enter the market or upgrade their current home or investment property and for those borrowers looking to refinance to access a better deal. It pays to speak to an expert who can help you understand your options in a rapidly changing climate,” concluded Ms Mitchell.