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RBA finishes 2015 by leaving cash rate on hold

The Reserve Bank failed to surprise anyone with its December cash rate decision, leaving the official cash rate on hold.


The Reserve Bank failed to surprise anyone with its December cash rate decision, leaving the official cash rate on hold.

The decision to leave rates untouched marks the seventh consecutive month that the official cash rate has been left on hold at 2%.

According to the minutes of the December Board meeting, a boost in consumer sentiment combined with easing property prices ultimately drove the Reserve Bank's decision.

Data from CoreLogic RP Data shows the housing market continues to see an easing in the rate of capital growth, with new research showing dwelling values actually fell across five of the eight capital cities in November, taking the combined capitals index 1.5% lower.

Across the capital cities, Melbourne recorded the biggest drop, with values falling 3.5% over the course of the month. Meanwhile, in Sydney, property prices fell 1.4% over the course of the month.

This data makes it clear that Australia's two hottest property markets have officially started to cool.

In addition to the recent drop in dwelling values, strong consumer sentiment encouraged the Reserve Bank to leave the official cash rate on hold in the run-up to Christmas.

According to the Westpac Melbourne Institute Index of Consumer Sentiment, confidence rose by 3.9% in November. To put that confidence boost in perspective, the Consumer Sentiment Index is now sitting at a level we haven't seen since January 2015 and is 8.3% higher than it was in September 2015.

In addition, optimists outnumber pessimists – marking just the third time this has happened in the last 21 months.

Of course, while the Reserve Bank has decided to end the calendar year with another rate hold, the fact remains that interest rates will not stay this low forever.

In fact, many economists are now predicting that the Reserve Bank could increase the cash rate in the not-too-distant future. With that said, now is the perfect time for potential investors and home buyers to start looking for their ideal property and home loan.

Further, those who are currently unhappy with their mortgage rate and feel as though they could be getting a better deal should shop around and see if there is another lender or product on the market that is better suited to their needs.

The reality is rates are still very low and Australia's lenders remain incredibly competitive and hungry for business – so now is the right time to act.

Posted in: Interest rates

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