RBA to keep a close eye on global economy

The Board is leaving rates on hold for 2nd month.

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, leaving the cash rate on hold at 2% for the second consecutive month.

Mortgage Choice mortgage broker Daniel Eigenmann said the RBA’s decision “made sense”, all things considered.

“Recent research conducted by RP Data shows property values continue to climb in both Sydney and Melbourne,” he said.

“Prices rose by 2.8% in Sydney and 2.9% in Melbourne in June alone. What makes this growth even more impressive is that it comes at a time when many of Australia’s lenders have started to tighten their investment lending policies.

“If rates were cut, property prices could climb even further – a fact the Reserve Bank is acutely aware of. As such, it makes sense for them to leave rates on hold and hope that the changes being made by the banks to investment lending policies will be enough to help slow investor demand and, in turn, property price growth in both Sydney and Melbourne.”

Mr Eigenmann said ongoing turmoil in Greece and slowing Chinese economy would have further encouraged the Reserve Bank to leave their powder dry today.

“Following Greece’s ‘no’ vote at its recent referendum, the Australian dollar has plummeted, hitting its lowest level since 2009,” he said.

“With this in mind, there is no immediate reason for the Reserve Bank to cut rates.”

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

“The Reserve Bank is likely to take a ‘wait and see’ approach to rates. They will continue to closely monitor the problems in Greece, as well the local economy, consumer sentiment and property price growth in Sydney and Melbourne,” he said.

“If any of these areas give them cause for concern, they will not hesitate to pull the rate lever. They have done it before and there is nothing to stop them from doing it again this year.”

If you want to learn more about your home loan options, call Mortgage Choice Subiaco (Perth) on (08) 6355 6834, email daniel at daniel.eigenmann@mortgagechoice.com.au, or visit www.mortgagechoice.com.au/ldaniel.eigenmann.

 

Other people have also read:

- Is it time to refinance your loan?

- Simple tips to save the deposit on your next home

 

If you want to find out if you could benefit from switching home loans (i.e. refinance) - take advantage of our Free 15-minute Home Loan Health Check service...

 

Mortgage Choice Subiaco, Perth - 2/33 Rokeby Road, Subiaco WA 6008 - Tel: (08) 6355 6834 - Mobile: 0412 022 110 - Email: daniel.eigenmann@mortgagechoice.com.au

Posted in: Interest rates

Contact us today.


Additional Comments? * :