Australia’s official cash rate will stay on hold at the record-low level of 0.1 percent.
The Reserve Bank of Australia (RBA) today decided to keep the interest rate on hold in spite of analysis that generally low rates were “supercharging” the property market.
In his monetary statement, RBA Governor Philip Lowe noted rising property costs yet kept up with that inflation was not yet sufficiently high to legitimize an ascent in interest fees.
“Housing prices are continuing to rise, although turnover in some markets has declined following the virus outbreak,” Mr Lowe said.
“Housing credit growth has picked up due to stronger demand for credit by both owner-occupiers and investors. The Council of Financial Regulators has been discussing the medium-term risks to macroeconomic stability of rapid credit growth at a time of historically low interest rates.
“In this environment, it is important that lending standards are maintained and that loan serviceability buffers are appropriate.”
In a speech two weeks ago, RBA Assistant Governor Michele Bullock said the central bank had to slice rates as an economic driver during COVID-19.
“The Reserve Bank reduced interest rates to historically low levels and introduced a suite of other policy measures to lower funding costs and interest rates across the economy,” Ms Bullock said.
“The banks offered borrowers deferrals on their loan repayments. There were moratoriums on evictions and rent relief for businesses and households.
“The idea was that we were building a bridge to get us over the economic crevasse created by the pandemic.”
Notwithstanding interest rates holding at 0.1 percent since November 2020, the true pocket cost of Aussie mortgages might change over time.
Head of customer research at Finder Graham Cooke said the onus was on borrowers to lshop around for the best deal
“Data from the RBA shows that banks changed their rates seven times during the last stable period. Four of those changes were rate increases – any they may well do it again,” Mr Cooke said.
“Those who aren’t on a fixed mortgage rate should stay alert to any changes from their bank, as it could mean substantially higher monthly repayments.”