RBA holds rates after two consecutive cuts

RBA holds rates after two consecutive cuts
RBA holds rates after two consecutive cuts

The RBA has held the cash rate at a record low one percent at its August meeting.

The decision follows slightly higher inflation than predicted for Q2 2019.

RBA Governor Philip Lowe said most housing markets remain soft, although there are some signs of a turnaround, especially in Sydney and Melbourne.

CoreLogic's head of research Tim Lawless says the decision to hold the cash rate was expected.

"The pause in the cutting cycle will give the RBA time to assess the effects of earlier rate cuts on the economy and consumer spending, however there is a strong likelihood of at least one more cut later this year," Lawless says.

"The housing market has been a key beneficiary of lower mortgage rates, with a trend towards stability over the first half of the year converting to a subtle rise in capital city housing values in July. 

"With mortgage rates set to remain low for an extended period of time, as flagged by RBA Governor Lowe in a speech last month, and potentially move even lower later this year, we are expecting to see the housing market move into a gradual recovery, however with credit policies remaining tight and economic uncertainty still elevated, we aren’t expecting a material acceleration in housing activity or housing values."

Finder's latest RBA Survey found that economists and experts predicted small gains across every capital city market.

Graham Cooke, insights manager at Finder, said it's too soon to tell if this is an emerging recovery in the housing market or merely a 'dead-cat bounce'.

“In finance, the saying is that even a dead cat will bounce if it falls from great heights," Cooke says.

“Most economists surveyed foresee small levels of growth across the board, but a few tipped prices to tumble, especially in Sydney and Melbourne where one expert predicted a 7% drop.

“Whether you see this as a falling feline or the beginning of a true rebound, it’s clear that the full effects of the RBA’s recent cuts have yet to play out.

“However, after one of the strongest weekend clearance rates in Sydney in recent months (71%), there is definitely a detectable pulse,” Cooke said.

Canberra is expected to be the best performer with 2.27% gains. Sydney and Melbourne are looking at 1.48% and $1.57% gains respectively.

Cooke said those considering getting on the property ladder need to get their ducks in a row.

“Prospective first time buyers should look at arranging pre-approval for finance soon if they want to take advantage of low rates before prices increase.”



Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

Tags: 
Interest Rates Rba Rate Decision

Comments

Be the first one to comment on this article
What would you like to say about this project?