April 07, 2020
The Reserve Bank of Australia (RBA) has decided to hold the nation’s official cash rate at 0.25%.
Mortgage Choice Chief Executive Officer, Susan Mitchell said, “Today’s decision from RBA board members follows two cash rate cuts in March. At the Board’s emergency meeting on the 18th of March members agreed on a package of measures designed to support the financial market and Australian economy, which included lowering the cash rate to the new record low of 0.25%.
“The decision to hold the cash rate today comes as no surprise, given the RBA had explicitly ruled out going into negative interest rate territory in the minutes of its special meeting. Members agreed that the cash rate was now at its effective lower bound and they had no appetite for negative interest rates in Australia.
“A cash rate so close to zero is unlikely to have much impact on market rates. Going forward, the Reserve Bank will look to monitor the impact of its unconventional monetary policy measures before resorting to cutting the cash rate again.
“While there isn’t much room for home loan interest rates to fall further, a sustained period of low interest rates will support households and businesses alike as they weather the COVID-19 induced storm. Home loan interest rates are sitting at record lows and this is particularly the case with fixed rate home loan interest rates, which are extremely competitive at present. With lenders advertising fixed rates in the low “2”s, now might be a good time to lock in a low rate,” said Ms Mitchell.
“The property market will be tested in the coming months, much like many other parts of the economy. While the latest CoreLogic Hedonic Home Value Index revealed that dwelling values continued to rise in March, up 0.7% nationally, it was the lowest monthly gain since the market turned in July last year.
“The outlook for dwelling values is uncertain and only time will tell how a contraction in economic activity will impact dwelling values but it’s fair to say that social distancing measures will likely dampen demand in the medium-term.
“Monetary policy measures along with the Australian Government's fiscal stimulus packages should help support the economy and may cushion the impact on the property market in the long-term. The important thing for Australians to keep in mind is that it’s never been more important to understand what your options are. For most of us, this will be a once in a lifetime event. Navigating this period with a financial expert by your side can help you stay in control and keep on track with your financial goals.
Ms Mitchell said, “In these uncertain times it is paramount that Australians seek the advice of qualified experts when it comes to their finances. Borrowers who are worried about their home loan should speak to their local mortgage broker as soon as possible,” concluded Ms Mitchell.