No change as RBA keeps interest rates at 0.1%
Today was hardly the ‘rates that stop a nation’ as the RBA monthly board meeting again opted to hold interest rates at a very low 0.1%.
As many Australians took time out to watch today’s Melbourne Cup, the RBA board met – presumably in Verry Elleegant surrounds – and continued to back its low interest-rate policy for a 12th month in a row.
‘The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range,’ the RBA said today in its statement. The RBA is sticking to their guns, tying rates to inflation, despite lots of murmurs about impending rate increases.
‘The Board is prepared to be patient, with the central forecast being for underlying inflation to be no higher than 2.5 per cent at the end of 2023.’
Which is still good news for those with a home loan. Others trying to get into the property market, however, are still feeling the squeeze.
Sharp increases in Aussie house prices are making home deposits even harder to scrape together. Stagnant income growth makes that even more difficult.
Sensing this could lead to a crisis in household debt, the Australian Prudential Regulation Authority (APRA) announced new mortgage loan rules from November 1, which will restrict the amount a person can borrow. It’s one more impediment to a first home loan, but a regulatory down payment that should strengthen the market and avoid a mass of loan defaults in the mid-term, when rates do increase.
And with an election due in the first half of 2022, the federal government will not want home affordability and rising household debt to become damaging political issues.
‘The Bank welcomes APRA’s recent decision to increase the interest rate serviceability buffer on home loans. It is important that lending standards are maintained at a time of historically low interest rates,’ noted the RBA today.
These are tough times for those wanting a home loan, with demand for houses seemingly outstripping supply.
It’s not all doom and gloom, though. Covid restrictions have finally eased across the country as vaccination levels hit record numbers. Economic signs are good as we transition into a “vaccination economy”.
The central forecast is for GDP growth of 3 per cent over 2021 and 5.5 per cent and 2.5 per cent over the following two years, predicted the RBA.
What’s more, lenders continue to cut already low home loan rates. Little wonder the RBA continues to trumpet the fact that financial conditions in Australia ‘remain highly accommodative, with most lending rates at record lows.’
That’s nothing we don’t already know. Though for how long?
The RBA has said they don’t expect rates to rise till at least 2024, but market watchers are sensing change. Small rate increases in some fixed home loans at the big four banks underlines this sentiment.
Now could be an opportune time to take stock of your loans for a property investment or home. You can trust Mortgage Broker Group to expertly guide you. Contact our friendly and experienced team to help find a rate that can work for you and your financial situation.
And, of course, we have video conference calls if required.