November 05, 2019
The Reserve Bank of Australia (RBA) has made the decision to hold the nation’s official cash rate at 0.75% today.
Chief Executive Officer of Mortgage Choice, Susan Mitchell said, “The decision from RBA Board members to pause their cutting spree was largely expected by the market and will give previous cash rate reductions time to absorb into the economy.
“The latest domestic economic data has provided the Bank with some breathing room.
“Encouraging data from the labour market played a part in delaying the need for another rate cut. Data from the Australian Bureau of Statistics (ABS) revealed that the unemployment rate fell to 5.2% in September. And, while this would have been welcome news to policy makers, it is still far off the RBA’s unemployment target of 4.5%, which suggests that another rate cut may be on the cards in the coming months.
“In other positive news for policy makers, inflation grew over the September quarter, rising 0.5% from the June 2019 quarter. On the other hand, the annual rate of inflation rose 1.7% over the twelve months to September 2019, which is below the RBA’s target range.
“The low rate of growth in annual inflation was attributed to low price rises for housing related expenses as a result of consumers holding off from their property purchasing plans in the first half of the year. If the recent recovery in the housing market is sustained and more widespread across the country, we may yet see an improvement in the inflation reading.
“The property market continues on its road to recovery, with the CoreLogic Hedonic Home Value index revealing that national dwelling values rose for the fourth consecutive month in October. The growth, which until recently had been limited to Sydney and Melbourne, was more widespread over the month of October with seven of the eight capital cities recording gains.
“According to the Westpac-Melbourne Institute of Consumer sentiment, consumer sentiment fell in October to the lowest level of the index since July 2015. Policy makers are acutely aware of the vital role consumers play in the economic growth outlook, but given that consumers tend not to react favourably to cash rate reductions, it was prudent for the RBA to hold off from delivering yet another back to back cut.
“That being said, we cannot rule out the possibility of another cash rate cut in the near future, which means borrowers need to be prepared to negotiate a better home loan deal, or speak to an experienced mortgage broker who can haggle with lenders on their behalf.
“My advice to borrowers would be to make an appointment to speak to your local mortgage broker and find out what your options are, especially if you’ve been in the same home loan for more than two years. If you are able to access a lower interest rate, you might want to consider keeping your repayments at the same rate and pay off your home loan sooner,” concluded Ms Mitchell.