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RBA Rates Update Feb 21

02.02.21 | Marc Barlow | Reserve Bank Announcements

We knew that interest rates weren’t going to increase following today’s Reserve Bank meeting. At their last meeting in December, they took the bold step of predicting that interest rates wouldn’t increase for at least three years.

So the only question was whether, due to the economic calamity brought on thy COVID-19, the board of the RBA would actually cut rates to an almost-unimaginable 0.0%. Spolier alert: they didn’t.

Rates remain on hold following December’s cut from 0.25% to 0.1%. The RBA are satisfied that economic indicators are mostly, ever-so-slowly, moving in the right direction. There’s no cause for alarm or drastic action, but things are still a long way from ideal. In fact, in their statement that accompanied the February non-announcement, the RBA said the outlook for the economy was ‘bumpy’. But – as long as Australia keeps on keeping on with our largely successful battle with the pandemic, and the vaccine rollout is successful globally – we’re headed in the right direction.

Unemployment is edging lower. If this keeps up, wage growth should naturally follow as the employment market tightens. This then allows for inflation to gradually head up. And when that hits the RBA’s target of at least 2%, and sustains that level, interest rates can start to tick up. This is all very gradual – the RBA can’t foresee any increases in interest until at least 2024 – but the roadmap is there.

One surprising bit of news from today: the RBA thinks Australia’s GDP (the value of goods and services created here) with hit pre-pandemic levels in just 4 or 5 months. That’s pretty impressive given the recent COVID havoc and the fact we were in a technical recession just a few months ago.

So what does that mean for homeowners, and is it good or bad for investors and first home buyers? Over summer, most capital cities saw a bump in housing values. We’re not sure yet whether this is a trend or a blip. Everyone’s holding their breath to see what happens after the JobKeeper and JobSeeker supports are removed in March. Some analysts are suggesting this will spell the end for many businesses who have been propped up by the government programs. This could lead to a spike in unemployment, a dent to consumer confidence and a general economic downturn. Or not.

Whether property prices slowly increase, remain stable, or drop slightly is impossible to predict. What we do know for sure is that stable interest rates mean borrowers can plan with a very high degree of certainty. Fixed or variable rates are hardly even a question now, with rates seemingly locked down for the time being.

As always, Mortgage Broker Group will be keeping a watchful eye of the real estate market and the leading indicators that help us anticipate future changes.

If you want to check up on your existing mortgage, or are looking to buy or invest, take advantage of our brokers’ collective experience, and let us help guide you towards a loan that best suits your personal aims and financial situation.

Contact Mortgage Broker Group today.