RBA takes ‘wait and see’ approach, leaves rates alone

March 03, 2015
Jay Stewart

In the lead up to the Reserve Bank of Australia’s March Board meeting economists were divided over whether or not we would see another rate cut.

But after careful analysis, the Reserve Bank has decided to err on the side of caution and leave the cash rate untouched.

It would appear the strong rebound in consumer confidence was enough to quell the Reserve Bank’s desire to cut the cash rate again so soon.

According to new data from the Westpac Melbourne Institute of Consumer Sentiment, confidence enjoyed an 8% spike following the rate cut.

This dramatic improvement in confidence means the number of optimists now outweighs the number of pessimists for the first time in 12 months – something the Reserve Bank would be acutely aware of.

But while this bounce back in confidence was enough to encourage the Reserve Bank to leave the cash rate on hold this month, we shouldn’t expect this to be the beginning of another prolonged period of interest rate stability.

Quite the opposite.

In the minutes of its February Board meeting, the Reserve Bank made it very clear that it will cut the cash rate again if the need arises.

Many economists are predicting that the next cash rate cut could come as early as the May Board meeting, while others believe it will happen before the end of the financial year.

Regardless of whether the Reserve Bank of Australia does look to cut the cash rate again in the future, potential home buyers and current home owners are already in a great position, with home loan rates currently sitting at historical lows.

When the Reserve Bank announced it would trim the cash rate by 25 basis points last month, many of Australia’s lenders were quick to follow suit, cutting their variable rates by up to 30 basis points.

As such, home loan rates are currently sitting at 60 years lows, benefiting both potential buyers and home owners.

If you already have a mortgage, now may be a great time to review it and see whether or not there is a better and cheaper deal on the market for your needs.

I can provide you with a free home loan health check to see if you are still in the right product for your needs. 

You may find that there is a deal with a sharper rate on the market that is better suited to you and your needs. Furthermore, through refinancing, you may find you are able to save yourself hundreds, if not thousands of dollars in mortgage repayments.

Alternatively, if you are thinking of purchasing property in the not-too-distant future, now is a great time to look at your options given that the cost of borrowing is now more affordable than it has been in a long time.

What have you got to lose? 


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Posted in: Interest rates

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