March 01, 2022
The Reserve Bank of Australia (RBA) has decided at its March monetary policy meeting that it will keep the nation’s official cash rate on hold at 0.10%.
Speaking about the decision, Mortgage Choice National Sales Director David Zammit said, “Strong economic conditions are setting the stage for a rate hike later in the year, but the latest data did not support a rise in March. The wage price index revealed a modest growth in wages in the December 2021 quarter, but not enough to prompt the Reserve Bank to bring forward a rate increase.”
Property market data shows that house price growth is beginning to slow but activity remains high. Eleanor Creagh, PropTrack Senior Economist said, “At the moment, views per listing are at a record high, and the PropTrack measure of high intent prospective buyer demand has moderated off peak levels but remains well above average levels - indicating a still strong level of buyer demand. We expect that that will moderate over this year.
“While we are certainly getting closer to the housing price peak, it's worth remembering that the RBA is explicitly waiting for a sustained pick up in wages growth before raising the cash rate, and that wage growth increase will help buffer the increase in mortgage rates. Also, by the time the RBA raises the cash rate, the economy will have strengthened.”
Mr Zammit said, “While the cash rate remains on hold fixed rates have been rising independently which is steering borrowers away from this type of home loan product.
“Mortgage Choice monthly home loan approval data reveals demand for fixed rate mortgages dropped to its lowest level in five months in February, with only 26% of borrowers opting to fix part or all their mortgage compared to 43% in September 2021. Variable home loan rates are a much more attractive option for the time being.
“My advice to borrowers who are anxious about the impact of future rate rises would be to speak to their mortgage broker. When interest rates rise they will rise gradually, and there are ways borrowers can prepare today so they don’t feel the pinch later on. Ensure you’re on the lowest home loan interest rate you can access and if you can afford to, make extra repayments on your loan so you can feel confident and in control of your finances when rates rise,” concluded Mr Zammit.