Spring cash rate hold signals new growth

September 03, 2013
Jay Stewart

Mortgage Choice points to improving economic data as upside of rate hold

With consumer sentiment on the rise, the Reserve Bank of Australia’s (RBA) decision to keep the official cash rate on hold at 2.5% this month is not surprising, and shows confidence that the economy is strengthening.  

According to the Index of Consumer Sentiment, consumer confidence jumped by 3.5% in August, from 102.1 to 105.7, the highest point the index has hit since March 2013.  

In light of this positive indicator, and other improving data points, many won’t be surprised that the RBA chose to keep rates on hold.  

“It is clear that the effects of previous cuts are beginning to flow through into more positive economic data, and this month with spring on our doorstep, that is likely to be the case again.  

“There has been a significant increase in housing lending volumes with ABS Housing Finance figures showing that the seasonally adjusted total value of dwelling finance commitments rose 1.2% in June 2013, compared with May 2013. At the same time, the total value of owner occupied housing finance commitments rose 2.1% in June 2013,”  

House prices are also starting to move upwards, as auction clearance rates rise. RP Data shows capital city dwelling values rising 1.6% in July 2013, which puts the cumulative recovery in residential home values at 6.5%, since May last year.  

“Our eyes will be on the data during the month ahead as to whether rate cuts are likely in future. We will also be keeping a close eye on whether consumer and business confidence picks up further following the federal election as many businesses have likely been holding back from making key investment decisions until they know who will be living in the Lodge,”  

Concluding, it is important to bear in mind that even though the RBA chose to keep rates on hold this month, it still has an easing bias, so it is unlikely that it will start lifting rates any time soon.  

“Mortgage holders and those looking to invest in property should see this month’s decision by the Reserve Bank of Australia as a positive start to the spring buying and selling season. Interest rates are at historically low levels, and this means that the cost of borrowing is more affordable than it has been in a very long time.  

“It is the season for new beginnings and it may be the right time to review your current home loan to make the most of the low interest rates on offer. If you do consider switching, be sure to review your options on more than interest rate alone. Take the time to compare all aspects of the loan from the rate to the fees and features to make certain you are getting a loan that is truly suited to your needs,”

If you want to learn more about your home loan options, call 5502 8906 or click on the 'contact us' tab at the top of the page. 

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