The first RBA meeting for the year has seen the official cash rate held at 2.50%.
Borrowers have missed out on a new year's mortgage kickstart—the Reserve Bank has kept the rate held at 2.50% for the fifth consecutive month.
As has been the case with many of the recent decisions from the RBA, most had tipped the cash rate to hold due to the impact past rate cuts were having alongside improvements in the domestic economy and a dropping Australian dollar.
The ASX RBA Rate Indicator put the chance of a rate cut at only 5% for this month, with the chance of the rate being held at 95%.
Governor of the RBA Glenn Stevens said that domestic indicators, including "slightly firmer consumer demand" foreshadowing "solid expansion in housing construction" and expectations of below trend growth for the short term means that "the most prudent course is likely to be a period of stability in interest rates".
He also made mention of the effect lower interest rates and a lower Australian dollar have had in recent times.
"In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target," Mr Stevens said.
All of the commentators and economists finder.com.au surveyed this month correctly forecast the rate would be held.
AMP Economist Shane Oliver said the Reserve Bank would be responding to data including a lower Australian dollar and also a higher than expected inflation target. “...in recent times the Reserve Bank has indicated it thinks it has cut enough and it is focused on getting the Australian dollar down, the last meeting has seen data from Australia that each rate cut has gotten traction and we’ve also seen a fall in the Australian dollar to below 90 US cents, so that is what they want and the inflation level higher than expected,” he said.
Commsec Economist Savanth Sebastian said that housing conditions have also improved, which would have a bearing on the RBA’s decision this month.
“The housing sector is starting to lift in terms of construction activity and support and growth storing,” he said.
“...at the same time you still have that larger indicator of employment, which is still lagging and this week the reserve bank is comfortably on the interest rate sidelines. They may actually start shifting their stance to a more neutral stance following this change decision.”
Michael Witts - ING Direct
The RBA is seemingly looking to talk the currency lower to provide a broad stimulus to the economy away from the housing sector. This reflects increasing evidence that the housing sector has gathered considerable increased price momentum over the summer period. Volatility in global emerging markets would encourage the RBA to sit tight until a clearer picture emerges. Despite the marginally softer recent employment data, the higher CPI print re-enforces expectations that the RBA will be on hold."
No change but game on for borrowers
finder.com.au money expert Michelle Hutchison said that regardless of the Reserve Bank's decision not to cut, competition is still high between home loan lenders.
“For the past 2 years up until November 2013, lenders have generally moved when the cash rate moved, but in the last month we have recorded 42 fixed and variable home loan rate changes, where more than half have decreased their rates.
“Of those, only two from the big banks have lowered their fixed rates - Westpac and NAB both decreased their three year fixed package home loan by 0.05 percent to 5.14 percent."
Mrs Hutchison said that because of this borrowers no longer need to wait for changes to the cash rate.
“There are currently 35 variable rate and 46 fixed rate loans under 5 percent on finder.com.au. The lowest variable rate being 4.49 percent from loans.com.au and the lowest 3 year fixed at 4.84 percent by ME Bank.