25 months... RBA holds at 1.5 percent at September 2018 meeting

25 months... RBA holds at 1.5 percent at September 2018 meeting
25 months... RBA holds at 1.5 percent at September 2018 meeting

The September meeting of the RBA has seen the cash rate remain on hold at 1.5 percent.

It has now stayed at record lows for 25 consecutive months.

The August rate hold marked the two year anniversary of the last change to the cash rate by the RBA. 

CoreLogic head of research Tim Lawless said prospects of a higher cash rate have been pushed back further.

"There are plenty of factors keeping interest rates on hold, but top of mind is the fact that mortgage rates are already edging higher as lenders look to balance their profit margins against higher funding costs and a smaller deposit base," Lawless said.

"With the first of the Big Four banks announcing an out of cycle rate hike, the prospects for a higher cash rate have likely been pushed back even further; we could even see debate for a lower cash rate becoming more prominent."

Lawless suggested financial markets are betting the cash rate will stay on hold until at least January 2020.

"Plenty of slack remains in the labour market, housing prices are trending lower, household debt levels are at a record high, core inflation is tracking below the RBA’s target range of 2-3% and retail trade is slow," Lawless noted.

"Despite the outlook for a stable cash rate, but slightly higher mortgage rates, we can expect lenders to remain hyper competitive, particularly for high quality borrowers – those with large deposits, lower debt to income ratios and a strong credit history. 

"Even with mortgage rates starting to edge higher, from a historical perspective, rates remain extremely low which will continue to support housing demand. 

"No doubt borrowers will be applying pressure on their lenders to ensure they are on the lowest rate possible."

The monthly RBA survey of 30 experts and economists conducted by Finder.com.au found nearly 90 percent of respondents felt the next rate change will be a hike.

The majority believe the hike will come in the second quarter of 2019.

HashChing surveyed a cross-section of its broker network ahead of the RBA interest rates and 80 percent believe rates will remain unchanged into 2019.

There were 41 percent of brokers who felt that more than a quarter of home loan borrowers who secured a loan last year would not be successful if they applied for the same mortgage today.

Most brokers said that at least half of all of their refinance clients paid too much interest on their original home loan because they did not shop around.

HashChing COO Siobhan Hayden said banks are scrutinising everything.

“The reality is, it has become a lot harder to secure a new home loan or refinance an existing one," Hayden said.

"Banks are scrutinising everything, whether it’s how much borrowers are spending on tolls, Netflix, or ASOS.

"Those wanting to get ahead and buy a home or refinance need to be proactive and seek financial advice from a verified expert that understands the recent changes to lending.”

“Brokers are reporting that a sizable portion of borrowers who secured their home loan as little as a year ago would be unable to access the same mortgage deal today.

"This is because lenders are tightening their credit policies and shining an unprecedentedly harsh spotlight on applicants’ living expenses.

“Reviewing a loan applicant’s living expenses is a rational metric to assess suitability for the loan, and doing so should provide more protections for both banks and borrowers.

"However, combing through living expenses is having an adverse effect on existing homeowners who would not qualify for their current mortgage today. This leaves them unable to refinance and stuck with their existing rate.

“It will be interesting to see whether the enhanced rigour and scrutiny of living expenses delivers better outcomes for consumers, or if it will just help the banks maintain high interest loans.


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.

Rba Rate Decision Rba/philip Lowe

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