May 05, 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%.
Speaking about the decision, Mortgage Choice Chief Executive Officer Susan Mitchell said, “Today’s monetary policy decision from the Reserve Bank comes as no surprise. With the cash rate sitting at the effective lower bound, the only way to go is up but not before key economic indicators show sustained improvement.
“In a speech delivered on April 21st, Governor Lowe outlined the Bank’s key economic forecasts. Lowe also indicated that the next move to the cash rate would be up, and the next move will not occur until we make sustainable progress towards the Bank’s goals for full employment and inflation,” said Ms Mitchell.
“The most recent data from the Australian Bureau of Statistics (ABS) revealed that the unemployment rate rose to 5.2% in March, however the data was collected before the pandemic was declared and major actions were taken in Australia. Given that we are yet to see the full extent of the impact of the COVID-19 pandemic on the labour market, it would be reasonable to assume that the cash rate will hold for some time yet.”
“The housing market is proving resilient to the impacts of the COVID-19 pandemic. While social distancing measures have dampened activity in the property market, dwelling values continue to grow. According to the CoreLogic Hedonic Home Value Index, national dwelling values grew 0.3%, supported by a rise of 0.4% in Sydney but a fall of 0.3% in Melbourne.”
“A record low cash rate means we are seeing some of the lowest mortgage interest rates in history, which is driving borrowers in droves to chase better deals over new property. Mortgage Choice home loan approval data reveals that over the month to April 2020, there was a huge uptick in the proportion of borrowers looking to refinance. There was an increase in demand for refinance of over 16% for owner-occupiers and nearly 14% for investors. We are also seeing a shift in the product type borrowers are opting for. Mortgage Choice home loan application data reveals that demand for fixed rate home loans surged almost 8 percent over the month to April 2020 and application data from the first few days of May suggests that demand for fixed rate home loans is only set to increase.”
“As expected, consumer sentiment plumutted in response to the pandemic. According to the Westpac-Melbourne Institute of Consumer Sentiment index, sentiment recorded the single biggest monthly decline in the 47 year history of the survey, taking the index beyond GFC lows.”
“Meanwhile, according to the NAB Monthly Business Survey, business confidence saw its largest decline on record and is now at its weakest level in the history of the survey. Business conditions also declined sharply in March, in response to the COVID-19 containment measures.”
“Borrowers are seeking certainty in an uncertain time and one way to achieve this is by locking in a low interest rate on their home loans. While there are many great deals to be had at present, I urge borrowers who may be considering locking in a fixed interest rate to speak to an experienced mortgage broker first to determine whether it is the right decision for their needs.”
“I also encourage any borrowers who haven’t had their home loan reviewed in over two years to speak to their local mortgage broker. The lending landscape has changed significantly in recent times, and it’s possible that their needs have as well, which means that their home loan may not be meeting their needs. Schedule an appointment to speak to your local broker to find out if you could be getting a better deal today,” concluded Ms Mitchell.