Rate hold signals bright outlook

Despite sharemarkets locally and overseas experiencing some volatility in June, the Reserve Bank of Australia's (RBA) decision to leave the cash rate on hold at 2.75 per cent for a second consecutive month may indicate the RBA doesn't expect such instability to persist this month.

There are indications of an improving outlook for the Australian economy, which the RBA would have taken into consideration.

The strength of the Australian dollar has lessened recently and this is expected to have a positive impact on parts of the economy, once the effect trickles through. Specifically, the impact should be felt in the non-mining sectors such as retail, manufacturing and tourism industries, which in turn will likely drive local employment.

Adding to the potential positive flow-on effect of the dollar, there has also been increased interest and activity in the domestic property market on the back of previous rate cuts.

For those looking to get into the housing market, the current low interest rate environment can be extremely appealing and may be the catalyst for buying now. Lenders are competing for business and this is seen across the board, from the major banks right through to credit unions and smaller non-bank lenders. So if you are looking to take out a loan make sure you look at options from a wide range of lenders to find the most suitable product and lender for you.

The combination of a historically low cash rate and competitive offerings from many home loan lenders is also providing mortgage holders with an opportunity to refinance to a better deal, as well as getting ahead with their loan repayments and possibly even accessing their additional funds or built up equity to achieve new financial goals.

While the RBA is holding tight this month, the current environment doesn’t rule out the prospect of future rate cuts.

The Reserve Bank stated in its last meeting that there is still room to move the cash rate should the need arise. At the same time, there is a common view that the Reserve Bank will make at least one further cut this year, with the odds-on an August cash rate cut.

It looks like we could find ourselves with a double header in August, with the possibility of both a Federal Government election and cash rate cut on the cards.

To arrange a home loan health check or for more information call Mortgage Choice in Paddington on 07 3369 5620.

Posted in: Interest rates

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