December Cash Rate Decision

December 01, 2015
David Thomas

RBA ends year with official cash rate on hold

 The Reserve Bank of Australia has decided to leave the cash rate on hold once more, marking the seventh consecutive month that the cash rate has been 2%.

A better than expected consumer sentiment result combined with easing property prices ultimately drove the Board’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 a recent drop in dwelling values, strong consumer sentiment would have also 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, which is a cracking result.

To put this improvement in confidence in perspective, the Consumer Sentiment Index is now sitting at a level we haven’t really seen since January 2015.  Further, the Index is 8.3% higher than in September and marks the third month in the last 21 where optimists outnumber pessimists.

The bounce back in confidence was great news heading into Christmas and the Reserve Bank would be careful not to do anything that would jeopardise sentiment at this time.

As per the findings of the Index, consumers are incredibly upbeat about Christmas spending this year, with one in five Australians stating that they plan to spend 'more' this year.

But while the Reserve Bank of Australia has decided to finish the calendar year with the official cash rate sitting at 2%, that does not mean to say rates will continue to sit at this historically low level forever.

In fact, some economists are now predicting that we could see a cash rate rise in the not-too-distant future. So, for those thinking of buying property in the New Year, now is a really good time to start looking.

Rates are still very low and Australia’s lenders remain incredibly competitive and hungry for business.

 For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711.

Posted in: Interest rates

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