The streak of low interest rates continues after the Reserve Bank of Australia decided to hold the cash rate at 2%. The cash rate has not moved since May last year, which has been welcome news for anyone with a mortgage.
At its April meeting, the Reserve Bank stuck to its cautionary approach to monetary policy. While there has been a lot of talk about low inflation and economic instability following the mining boom, Governor Glenn Stevens isn’t alarmed.
“In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom,” he said in his statement after the meeting. He went on to highlight the good condition of the housing market and explained that Australia has good prospects for reasonable economic growth.
The only hint of a future drop came from continued low inflation, though the Reserve Bank is holding its cards close to its chest. Currently, inflation is sitting at 1.7%, which is below the target of 2–3%.
Despite this, the following economic factors are all looking up:
- Domestic growth has strengthened
- Commodity prices have risen
- Global markets have rebounded
- Demand in non-market sectors has picked up
- Unemployment has dropped to 5.8%
The decision to leave the cash rate on hold does not mean that home owners won’t be subject to out-of-cycle interest rate increases. A recent change in regulations will limit the capacity of major banks to rely on short-term wholesale funding. As a result, there is speculation that banks may pass on higher funding costs to borrowers.
Right now, however, this is only speculation. If you are concerned about a change to your interest rate, you can consider fixing part of your home loan as a precautionary measure. It is unlikely that the cash rate will increase this year, which leaves us with an outlook that will keep home owners happy.
The Brisbane property market stats you need to know
- Official cash rate: 2%
- Brisbane median house sale price (February): $610,000
- Brisbane median unit sale price (February): $480,000
- Auction clearance rate: 49%
- Best available variable interest rate: 3.98%
- Best available fixed interest rate: 3.99% (for a three-year term)
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