RBA leaves cash rate on hold at 3%

The Reserve Bank has left the cash rate on hold at 3% for the second month in a row following its monetary policy meeting today.

The decision was in line with the expectations of most economists and follows the release of ABS figures earlier today showing retail turnover rose 0.9% in January, the strongest rise in seven months and the best January figures in six years.

It leaves the cash rate at its lowest setting since the GFC.

ANZ will make its independent interest rate announcement on Friday.

“The recently released index results from RP Data provided a further reason for the RBA to leave interest rates on hold,” commented RP Data’s research director Tim Lawless.

“The housing market is clearly on a recovery path, with capital city dwelling values having risen by 3.3%  since reaching what appears to be the bottom of the market in May last year.

"Capital city dwelling values rose a further 0.3% over the month of February, after posting a solid 1.2% rise in January.  Auction clearance rates have remained consistently high and the number of home sales was 7.6% higher over the second half of 2012 compared with the first half, which suggests consumers are more willing to make high commitment purchase decisions.

“It has taken the housing market longer than normal to respond to such low mortgage rates, however it would be reasonable to assume that the RBA would be fairly comfortable with the housing market outcome to date,” Lawless says.

Michelle Hutchison, spokesperson for mortgage comparison website Ratecity.com.au says borrowers don’t have to wait for the RBA to cut the cash rate to save on their home loan repayments.

“We are seeing more financial institutions than ever before moving their interest rates while the Reserve Bank leaves the cash rate on hold.

“It shows that the Reserve Bank appears to have less influence over institutions’ decisions, where previously they would wait for a “green light” from the Reserve Bank before moving their variable rates.

RateCity found four lenders which lowered some of their variable home loan rates by as much as 0.20 percentage points last month.

“However, we haven’t seen any variable rate moves from the major banks, which hold 92% of the home loan market,” she says.