RBA Cash Rate Announcement – March 2014

Information verified correct on December 7th, 2016

RBA holds cash rate at 2.50%

Cash rate decision

The RBA has held the cash rate again for the month of March—a decision that many think will be repeated for the better part of 2014.

Governor of the RBA, Glenn Stevens spoke of an upsurge in the housing market and other indicators as reasons why the cash rate was left unchanged.

"...recent information suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement and exports are rising," Mr Stevens said.

He also echoed sentiments shared in the minutes from last month's decision about keeping the rates unchanged for a longer period of time.

"On present indications, the most prudent course is likely to be a period of stability in interest rates."

All of the economists and commentators surveyed by finder.com.au agreed that rates would be held this month.

The only point of difference in their forecasts was in what the Reserve Bank will decide to do next.

Carla Baldock from RAMS is forecasting they’ll decide to raise the rate at the end of this year or early in 2015, while NAB’s Alan Oster had a different forecast.

“We’re basically on hold until November and we’ve got one more rate cut in November,” he said.

AMP’s Shane Oliver forecasts the rate to be on hold at 2.50% until at least September.

“I think on hold. The reason is quite simple and it's been my view for some time, that we're in a lengthy period of interest rates on hold, probably until September,” Dr Oliver said.

Dr Oliver referred to the housing market and renewed confidence in the economy as some of the evidence behind his forecast.

“The reason is that even though the economy is still quite soft there is a lot of evidence that the interest rate cuts we've already seen are starting to help the economy. Housing has picked up, not just housing prices but also approvals to build new homes and that combines with somewhat higher levels of confidence in the economy (they're still depressed but they're up from their lows) and signs that retailing and other parts of the economy are looking a little bit healthier.”

The ASX Rate Indicator yesterday put the chance of a rate cut for this month at only 5%, with the chance to hold fluctuating between 95% and 98% over recent weeks.

Paul Bloxham - HSBC

Title

March forecast

"We have in mind that the RBA is on hold, we don't think they'll be doing anything with interest rates. In fact, we think that the easing phase is done, that the RBA won't be delivering any further rate cuts. The housing market is booming, inflation has already passed its trough, the economy is picking up pace and so the RBA won't feel the need to cut interest rates further this easing cycle."

What does this mean for borrowers?

finder.com.au Money Expert Michelle Hutchison said that while borrowers in some states were fixing more than others, more borrowers should take advantage of the low fixed home loan rates on offer before it’s too late.

“Our monthly Reserve Bank survey of leading economists expect interest rates to start rising within the next year. If variable rates move back up to the historical normal level of 7 percent, that will cost borrowers with the average $300,000 mortgage an extra $313 every month in repayments.

“If you can’t afford an extra $313 per month for a $300,000 home loan, you should look at your options and

compare fixed home loans

.”

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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