C&G's Guide to the August RBA Announcement

 

August marks 24 months since the RBA cut the official cash rate to 1.5%, and it’s remained at this all-time-low ever since. With housing markets in Sydney and Melbourne continuing to stabilize and rent inflation remaining low, the property market is behaving in a way that pleases Governor Philip Lowe and the board.

 

That said - despite good growth in the global economy, domestic conditions remain below expectation. Wage growth and inflation remain low, which are factors that continue to provide an accommodating environment for such a low central cash rate. Housing credit growth has fallen to an annual rate of 5.5% over the past year, largely attributed to declining investor activity within the changing market. This change - combined with high household debt, a weak labor market and a softening in some dwelling values prevent the board from implementing a rate rise.

 

Mortgage rates for owner-occupiers have been declining in recent months, while investor loans vary from lender to lender. Premiums remain in place for interest-only arrangements in an attempt to reduce the volume of household debt. Pundits sense that the RBA fears a cash rate rise could impact upon interest rates, having a negative effect on borrowers’ ability to repay their debts.

 

For mortgagees, now is the time to review your loan structure and discuss options with your broker. Many banks are offering introductory low rates and promotional fixed periods, which may offer the certainty you’re looking for with so many contradictory factors affecting the fate of the central cash rate.