Interest Rate Update - July 2015

RBA to keep a close eye on global economy

Strong property price growth in Sydney and Melbourne combined with growing problems abroad has encouraged the Reserve Bank of Australia to leave the cash rate on hold.

At today’s Board meeting, the RBA decided to err on the side of caution and leave the cash rate on hold at 2% for the second consecutive month.

Recent research conducted by RP Data shows property values rose significantly in both Sydney and Melbourne throughout the month of June, with prices rising by 2.8% and 2.9% respectively.

If rates were cut, property prices could climb even further – something the Reserve Bank is keen to avoid. As such, it makes sense for them to leave rates on hold for the time being.

Further, the ongoing turmoil in Greece has caused the Australian share market and dollar to plummet, giving the RBA even more reason to leave the cash rate untouched.

But while the Reserve Bank of Australia decided that no rate change was the best course of action for now, future rate cuts cannot be ruled out.

By taking a wait and see approach, The Reserve Bank can continue to monitor the problems in Greece, as well the local economy, consumer sentiment and property price growth in Sydney and Melbourne.  If any of these areas give them cause for concern, they will no doubt look to pull the rate lever.  They have done it before and there is nothing to stop them from doing it again this year.

With home loan rates continuing to sit at historically low levels, now is the perfect time to review your current mortgage situation or consider purchasing property.

Posted in: Interest rates

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