RBA holds rates steady at December meeting

RBA holds rates steady at December meeting
RBA holds rates steady at December meeting

The RBA held rates steady at its December meeting at 2 per cent at its last board meeting of the year.

Borrowers disappointed by the RBA’s decision to keep interest rates on hold can still get an early Christmas rate cut on their home loan by haggling their lender for a better deal, according to Mozo.com.au.

In a recent mystery shopping exercise, Mozo staff posing as borrowers were able to haggle huge discounts of up to 1.25% off the standard variable home loan rate, simply by calling up the banks and asking.

“The Big 4 are competing more fiercely for owner occupiers in the wake of the crackdown on investor lending, with discounts on offer to these borrowers the biggest we’ve seen,” said Mozo Director Kirsty Lamont.

Mozo data shows that by haggling 1.25% off the average standard variable rate, borrowers could save $223 a month on their repayments on a $300,000, 30-year loan.

“When pushed banks are prepared to offer better discounts beyond their advertised home loan deals which can lead to savings of $2676 each year for borrowers,” said Lamont.

The REINSW President John Cunningham said the announcement was largely expected. 

“This decision adds weight to a good stabilisation of the market into the New Year,” Mr Cunningham said.

Slower housing market conditions were likely a topic of conversation when the Reserve Bank board met today to deliberate on the cash rate setting. 

CoreLogic RP Data reported today a 1.5% fall in capital city dwelling values over the month of November and a 0.5% fall over in values over the past three months. 

"While the cash rate remained on hold, a less buoyant housing market is likely to provide the Reserve Bank with a greater degree of flexibility in adjusting interest rates without as much risk of over stimulating the housing market as what they have faced over previous months.

"While the Reserve Bank is likely to welcome a slowdown in the rate of home value appreciation, the overriding objective would be to avoid a significant downturn in the housing market, which would act as a weight on economic growth and potentially impact financial system stability," CoreLogic RP Data research head Tim Lawless said.

" Despite the stable rate setting, mortgage rates remain close to record lows which should continue to act as an incentive for home buyers and investors considering a property purchase," he added.

While today’s RBA decision to leave interest rates on hold has surprised no-one, Laing+Simmons managing director Leanne Pilkington said the cash rate is one of few steady elements in a housing market that has otherwise undergone recent change.

“The market for residential property has undergone a noticeable shift in recent months, with conditions moving toward a greater equilibrium between buyers and sellers, as opposed to the vendor favourable conditions earlier in the year,” Ms Pilkington said.

“The record clearance rates, low stock levels and rapidly increasing prices which characterised the first half of 2015 have now subsided somewhat as buyers exercise greater caution.

 “Demand remains robust, but we do not expect the double digit price growth of 2015 to be repeated in the year ahead,” she said.

The Reserve Bank of Australia (RBA) will continue to walk the interest rate tightrope over the summer as it considers a mixed bag of economic data, says mortgage broker John Kolenda adding it was no surprise to see the RBA following its final deliberation of 2015 leave official rates at the record low of 2.0 per cent.

But Mr Kolenda said a further rate cut is highly likely in the first half of 2016.

“The RBA has been a walking a tightrope leaving rates on hold since May this year due to the mixed economic data,” he said.

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Reserve Bank

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