RBA leaves cash rate unchanged through 2018 at 1.5 percent at December meeting

RBA leaves cash rate unchanged through 2018 at 1.5 percent at December meeting
RBA leaves cash rate unchanged through 2018 at 1.5 percent at December meeting

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

It has now stayed at record lows for 28 consecutive months, and 26 consecutive meetings.

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

Australian mortgage holders could "go a decade without experiencing an increase in official interest rates by the Reserve Bank of Australia (RBA), says mortgage broker 1300HomeLoan Managing Director John Kolenda.

"Its last rate rise from 4.5 per cent to 4.75 per cent was way back in November, 2010.

“Since the central bank last lifted official rates there have been 12 rate reductions, with the RBA now staying on the sidelines for more than two years,” Mr Kolenda said.

“With no evidence of a significant improvement in the domestic economy, many forecasters expect the cash rate will remain on hold through 2019 and also the following year.

“That means a whole generation of mortgage holders could go an entire decade without seeing official rates rise, although they will have experienced out of cycle rate movements from lenders.”

CoreLogic's head of research Tim Lawless said its hard to gauge the RBA's view on housing market conditions.

"The longest period of interest rate stability on record has extended out another month, with the RBA keeping the cash rate on hold at 1.5% where it has remained since they cut the cash rate by 25 basis points in May and August of 2016. 

"Considering the diversity of economic conditions, the hold decision comes as no surprise. 

"Labour markets are improving, but wages growth remains sluggish and inflation has softened. 

"It’s a bit harder to gauge the RBA’s view on housing market conditions, with the RBA continuing to call out weakening conditions in Sydney and Melbourne. 

"CoreLogic data to the end of November highlighted that the Sydney market has already recorded a 9.5% decline in values since peaking in July last year and will likely surpass the previous record peak to trough decline of 9.6% which was set during the last recession between 1989 and 1991.

"Despite this weakness in the largest cites, dwelling values in Sydney remain 41% higher than they were five years ago and Melbourne values are still 38% higher both of which show five year growth rates well in excess of most other capital city markets. 

"Additionally, five of the eight capital cities have posted a capital gain over year to date however, from a macro view they have much less of an influence on the national figures than Sydney and Melbourne do.

"To date we haven’t seen the housing downturn impacting on household consumption or saving, however this is likely to be a key factor the RBA will be monitoring.  

Siobhan Hayden, COO of online home loan marketplace HashChing, said Christmas is the best time to hunt around for a new home loan.

“The Christmas and New Year period is an expensive time of year, and one that forces many of us to consider our current financial position. The great thing is that it’s also a highly competitive season in the market – making it the perfect time to hunt around for a new home loan, or even help a loved one find the best rate on theirs.

“It’s fantastic to see an uptick in borrower’s actively taking charge of their financial position and getting ahead of likely interest rate rises in 2019.”

“As anticipated, falling house prices have warmed the market, particularly in the lower end of the market (>$1.3m), however with the cash rate expected to increase next year it will be interesting to see whether this demand continues."

HashChing's broker survey found almost half (48 per cent) of the brokers surveyed agree with Morgan Stanley’s forecast that national house prices could fall by up to 15 per cent in 2019. 


Mortgages Rba/philip Lowe


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