May announcement – Rates on hold for now and the foreseeable future
At today’s meeting the RBA announced that the official cash rate would remain at 0.25%.
Many economists are now predicting that the rate will stay at this historic low for the next 3 years, well into 2023. The pandemic has come hurtling through society like a bull in a china shop upending everything ‘normal’ and leaving somewhat chaotic scenes in its wake.
Previously held targets of a full employment rate of 4.5% now seem a bit bizarre. In fact the RBA are expecting to see unemployment peak at 10% and stay above 7% until at least the end of next year. For a long time, the RBA have wanted to see the inflation rate rise to between 2-3% and it did reach that target for the March quarter. But, there’s always a but at the moment, it’s not expected to last. Inflation is expected to fall again, mainly due to the drop in oil prices and isn’t expected to sustainably reach target levels for a long while.
In today’s statement, the RBA said it won’t increase the cash rate until progress is made towards full employment and the inflation rate is between 2-3%. In other words the cash rate will not be rising any time soon.
Banks have launched an advertising blitz to assure all customers that they are responding to the pandemic and are aware of the impact it’s having on customers. While it may be hard to believe their altruism, it’s definitely worth reviewing your current loan conditions, especially if you’re facing financial hardship. There are many options available to people who have lost work including interest-only payments and even suspending payments for a while.
Either way, you should be benefiting from low interest rates by being able to reduce your repayment amount or by making your repayment amount cut deeper into your loan. If you’re not sure, or you want a home loan health check, contact us and we’ll make sure you’re getting the best deal for you and your circumstances.
The RBA expects the economy to start recovering by the end of this year. It noted that stimulus measures and loan deferment options will help people through this difficult period. And while we aren’t all in the same boat, we’re definitely caught up in the same storm. If you want advice on your current loan and what options are available to you, please contact us.