Today’s RBA monthly board meeting, its first of 2022, announced that interest rates will remain unchanged at 0.1%.
This rock-bottom rate has been in place since November 2020 as Australia’s economy grapples with COVID-19 upheavals, exacerbated in recent months by the Omicron variant.
And despite increasing market speculation of rate rises, the board is persisting with the 0.1% rate.
The RBA explained that this setting remains appropriate for Australia’s economy right now.
‘Financial conditions in Australia remain highly accommodative… and the low level of interest rates are providing important support to the Australian economy as it recovers from the effects of the pandemic,’ the RBA said today.
‘The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.’
But the RBA conceded that inflation has picked up quicker than expected. Though it has confidence in the Australian economy’s strength and the settings in place during this pandemic.
‘The Omicron outbreak has affected the economy, but it has not derailed the economic recovery. The Australian economy remains resilient [but] the main source of uncertainty continues to be the pandemic,’ the Central Bank added.
So, what does it all mean as we move into 2022?
As a central bank, the RBA is continuing to support Australia’s economy with fiscal measures, primarily uber-low rates. Which is good news for Aussie borrowers in these pandemic times. However, 0.1% won’t last forever.
Economic factors alluded to by the RBA today, such as cost of living and wages growth, may rise over the coming year or two. And, as a result, rates could rise (albeit to a modest level).
In fact, Australia’s higher than expected inflation numbers in the last quarter has fuelled some of the current rate rise speculation.
Is it a surprise then that Australia’s big banks are all tipping some rate increases over the coming 12-18 months? No, but as financial guru Noel Whittaker told finder.com recently when asked about possible rate rises, “the timing is anybody’s guess”.
No change as interest rates start 2022 at 0.1%
With the RBA not holding a January meeting, today was the first opportunity to discuss monetary policy this year. So it really is a wait-and-see situation on rates.
On the other hand, house prices remain astronomically high, as you’ve probably noticed with many stories trumpeting Australia’s stratospheric housing boom.
Last December, Australia’s median house price rose by another 1% to $709,803. Meanwhile, ANZ is forecasting house prices to go up a further 6% in 2022.
And despite some market analysts seeing some levelling out of prices in Melbourne and Sydney, it’s this overall price rise that has led to concerns about household debt getting out of control.
‘Housing prices have risen strongly, although the rate of increase has eased in some cities.
‘With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers,’ noted the RBA.
These buffers include the industry regulator APRA (the Australian Prudential Regulatory Authority) applying the brakes to shield some borrowers from potential rate rises in the future.
Let’s face it, while house prices are rocketing, the cost of borrowing money has never been so affordable. With this in mind, Mortgage Broker Group can help find a loan that really works for you.
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