Rates on hold at 0.10% as the economic recovery continues
The outcome of this month’s meeting of the RBA was widely predicted yet there was an unusual amount of speculation from economists and commentators leading up to it. And for once, the focus wasn’t on the official cash rate – which stayed steady at 0.10% – but over the RBA’s quantitative easing programs and even over the role of the Reserve Bank itself.
2021 is proving to be almost as unpredictable as the year that was 2020. In many ways things are looking up. The roll out both here and globally of the COVID vaccines has coincided with a boost in consumer confidence. More and more workers are returning to their worksites, businesses are regaining customers, job ads are up and the property market is booming. The economic recovery seems to be going well. But for the RBA, an old problem has reared its head – inflation. And more specifically its ability to influence the rate of inflation.
Record low interest rates are helping give the economy a much needed boost, but one of the challenges is that the lower the rate, the less impact a reduction in that rate has. A rate of 0.10% is pretty much as low as they go and with inflation on the rise, the power of the RBA is under a bit of scrutiny.
As Governor Lowe said today ‘the outlook for the global economy has improved over recent months due to the ongoing rollout of vaccines. While the path ahead is likely to remain bumpy and uneven, there are better prospects for a sustained recovery than there were a few months ago’.
The property market has had a blistering start to 2021 with house values up across the country and rental vacancy rates getting lower and lower, particularly outside of capital cities. Many first home buyers have taken advantage of the low cost of borrowing and various Federal and State government incentive schemes to enter the market. With consumer confidence also returning, property investors are also back in the market.
Previously the RBA suggested that rates wouldn’t rise until at least 2024. It reiterated that commitment today, but with a potential boom in property prices, many are predicting that a rate rise (albeit a small one) might come a little bit sooner.
Regardless, there are plenty of opportunities with current market. To make sure you’re making the most of them, contact us and we’ll help you get the best mortgage for you.