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Rates on hold – but what does it all mean?

No surprises again today, with the Reserve Bank of Australia choosing to leave the official cash rate on hold once more.

No surprises again today, with the Reserve Bank of Australia choosing to leave the official cash rate on hold once more.

Today's decision marks the 13th consecutive month that the cash rate has been left at the historically low setting of 1.5%.

So what does today's decision mean for you?

The good news is, regardless of whether you are a borrower or are thinking about buying property in the not too distant future, today's decision will benefit you.

The decision to leave the official cash rate on hold will ensure home loan rates remain low, making the cost of borrowing very affordable.

In fact, over the last few weeks and months, we have actually seen a number of lenders trim the rates on certain home loan products in line with their appetite for business.

If you are an owner occupier making principal and interest repayments for example, you may have seen a drop in your interest rate in recent weeks. If you haven't, now is the ideal time to speak to your broker. With so much movement in the market, you may find there is another lender offering a much more competitive deal that suits your needs.

Now that you know how today's cash rate decision may impact you and your hip pocket, you may be wondering how the Reserve Bank came to their decision to leave the cash rate on hold once more.

According to many market analysts, today's decision was largely unsurprising.

In recent months, the Board has made it clear that a prolonged period of rate stability is consistent with sustainable growth in the economy and achieving the inflation target over time.

When coming to this conclusion, the Board looks at a raft of domestic and global economic factors. And while there have been positive developments in both the global and domestic economies, there is still plenty of room for improvement

Data from the Westpac Melbourne Institute of Consumer Sentiment found confidence slid a further 1.2% in August, marking the ninth consecutive month where pessimists outnumbered optimists

Increased pressure on family finances and interest rates has left Australian consumers feeling less than optimistic about their future. The Reserve Bank is acutely aware of this and understands that now is not the right time to adjust the monetary policy setting.

In terms of property, the outlook is relatively robust, with data from the Australian Bureau of Statistics showing home loan demand remains strong. Over the last 12 months, in excess of 53,000 home loans were written each month for a total value of more than $33 billion.

Increased home loan demand is putting greater pressure on the property market, which is resulting in higher property values across most of the capital cities. Sydney and Melbourne have led the charge over the last 12 months, with both capital cities enjoying dwelling value growth in excess of 10%.

While we may see price growth ease slightly over the coming period, most analysts believe property demand will remain strong as low rates continue to keep heat in the market.

Regardless of your situation, now is the perfect time to look at your finances and think about your property ambitions. With interest rates low, now is the time to put any property plans you have into practice.

Posted in: Interest rates

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