May 01, 2018
The Reserve Bank anchored the official cash rate at the record low of 1.5% yet again today, creating a new record for the longest period between moves.
The RBA Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
Mortgage Choice Chief Executive Officer, Susan Mitchell said the last time the RBA moved interest rates was September 2016 making today the 19th consecutive time the rate has remained static.
“But homeowners should not grow too comfortable with rock-bottom rates and should be prepared for an eventual hike in late springtime,” Ms Mitchell said.
This aligns with Governor Phillip Lowe, who has said when the economy can better absorb the impact and inflation is back at target level, he will lift the rate.
“The RBA’s decision to hold has come amid good performance in the Australian economy, the unemployment rate falling, business conditions improving, and home loan demand remaining stable,” Ms Mitchell said.
“Tighter credit standards have also been helpful in containing the build-up of risk on household balance sheets.”
In March, the US Federal Reserve made the decision to lift the target range for federal funds from 1.50% to 1.75%, marking the first time in seven years the RBA’s cash rate has been below the Fed’s.
“Recent weakness in the Australian dollar, which was trading at $0.76 against the US dollar this week remains to be helpful for the growing export market,” Ms Mitchell said.
“Other positive signposts in the Australian economy came from the Australian Bureau of Statistics (ABS), which reported the unemployment rate increased slightly to 5.6% in April, akin to notionally full-employment.
“In addition, business activity continues to perform strongly, with the latest NAB Monthly Business Survey showing business conditions and business confidence remaining above historic averages.
“Furthermore, home loan demand remains strong by long term standards, with the Australian Bureau of Statistics showing that more than 54,500 home loans were approved throughout February 2018”.
Ms Mitchell said despite the record low official cash rate, consumers should still take an active stance in ensuring they have got the best home loan rate.
“Of course, as and when interest rates do rise, it is important for borrowers and potential buyers to understand that mortgage interest rates still remain incredibly low by long term standards and most lenders are still offering competitive rates. Now may be a great time for borrowers to fix part or all of their home loans,” she said.
“Similarly, for anyone who is contemplating buying property in the near future, now is a great time to start the process.
“With all the change and volatility we are seeing in the market, I suggest that anyone who has been in the same home loan product for a while should speak to their local mortgage broker and ensure they’ve got the most suitable deal and one that suits their financial situation today, and over the long term.”