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Almost two years on hold

The Reserve Bank of Australia (RBA) has once again kept the official cash rate on hold at 1.50%, marking the 23rd month in a row that it has been left unchanged.

However, despite a stagnant cash rate, tightening money markets may force lenders to raise mortgage rates.

There are a number of factors in the Australian economy that may have influenced the RBA board’s decision to continue to hold the cash rate.

According to the Australian Bureau of Statistics (ABS), the unemployment rate is sitting at 5.4% and headline inflation is 1.9%, which is below the Board’s target range of 2-3%.

Further, the Westpac Consumer Sentiment survey found that while consumer sentiment rose in June, pressures on household budgets such as slow wage growth, declining house prices and rising petrol prices are taking a toll on the sentiment results.

Moreover, the latest National Australia Bank monthly business survey found overall business conditions remain favourable, as conditions in most industries remain at or above average levels.

CoreLogic’s Hedonic Home Value Index found that national dwelling values fell 0.2% in June, with falls in five of eight of the nation’s capitals.

Interestingly, while the RBA board have decided to hold the official cash rate once again, Australia’s lenders continue to make small out of cycle interest rate increases due to a mix of factors including an increase to wholesale funding costs, macroprudential regulation and tightened lending policies.

These factors combined mean that borrowers and prospective buyers should not take the current low-rate environment for granted as market expectations are for the RBA to raise the cash rate in 2019. This coupled with tightened lending standards, with regards to a borrower’s capacity to service a loan, creates a complex environment for borrowers and those looking to take out their first loan.

If you are looking to secure a competitive interest rate on your current mortgage or you hope to buy your first home, ensure you are in a healthy financial position by seeking the help of a qualified mortgage broker who can assess your financial situation, determine your borrowing capacity and when the time comes, find you a home loan product suited to your unique financial needs.

Whatever your financial aspirations are this financial year, Mortgage Choice can help. Contact us today.

Posted in: Interest rates

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