September 03, 2019
The Reserve Bank of Australia (RBA) has made the decision to leave the nation’s official cash rate unchanged at 1.00%.
Mortgage Choice Chief Executive Officer Susan Mitchell said, “My advice to borrowers who have been in the same home loan product for a while is: don’t wait to be offered a better deal on your home loan by your lender, because it won’t happen. The RBA may have held the cash rate this month but we have seen a 50 basis point cut to the cash rate since June, which has made the interest rate environment extremely competitive. Lenders are fiercely competing for new customers, which puts borrowers in a great bargaining position if they are prepared to switch lenders,” said Ms Mitchell.
Speaking about today’s decision, Ms Mitchell said, “The minutes from the RBA August Board meeting suggest there was no urgency to cut the cash rate this month; however the outlook for the domestic economy may lead to further rate cuts in the near term.
“RBA Board members may be waiting to assess the impact of back-to-back cuts in June and July, which appear to be having a positive effect on consumer confidence, the housing and labour markets.
“The latest Westpac-Melbourne Institute Index of Consumer Sentiment revealed that consumers were feeling more optimistic in August. This follows a drop in confidence in June and July when the RBA cut the official cash rate. The Index supports the long-held view that cash rate cuts raise concerns among consumers about the economic outlook. That being said, the latest index showed a positive reaction from consumers to housing-related sentiment in response to lower interest rates.
“There continues to be encouraging data from the housing market. The August CoreLogic Hedonic Home Value Index revealed that national dwelling values recorded the first rise in almost two years, driven by a 1.6% and 1.4% rise in values in Sydney and Melbourne respectively. As the Spring selling season kicks off, it will be interesting to see whether the recent increases in auction clearance rates and listings continue to drive growth in dwelling values.
“The ABS’ Labour Force survey revealed a slight growth in employment and a seasonally adjusted unemployment rate of 5.2% in the month of July, however the latest data from the business sector suggests the outlook for employment growth is soft.
“The latest NAB Monthly Business Survey revealed that the business sector has lost significant momentum since early 2018 and business confidence and conditions remained below average in July, suggesting that further monetary policy stimulus would be needed in order to turn things around for the private sector.
“Looking ahead, there is growing speculation that the RBA may resort to quantitative easing if the economic outlook does not improve. All eyes will be on the National Accounts data, which will be released tomorrow and is expected to show lacklustre economic growth over the June quarter,” said Ms Mitchell.
Ms Mitchell said, “Regardless of what the RBA decides next, the current market offers great opportunities for Australians who are looking to buy their first property, those looking to refinance their home loans or families looking to upgrade their home.
“With home loan interest rates at levels not seen since the 1950s and dwelling values finding a floor in some capital cities, those who wish to get their foot on the property ladder should speak to their local mortgage broker to put their best foot forward when preparing and submitting a home loan application.
“While housing market conditions are more attractive than they have been in recent times, it’s important to remember that the home loan application process is still as complex as ever and calling on an experienced mortgage broker for guidance through the process will give borrowers the peace of mind that their application is on the right track.
“For those buyers whose property purchasing plans are further down the track, it pays to speak with a mortgage broker who can help you determine your borrowing power, and help you apply for home loan pre-approval when you are ready,” concluded Ms Mitchell.