RBA leaves cash rate untouched at August meeting

Adam Smith 7 August 2018 NEWS

It's now been two years since the last change to the official cash rate.

The Reserve Bank board chose to leave the official cash rate untouched at 1.50% at its August meeting. The result was widely predicted, with 100% of the experts polled in the finder.com.au Reserve Bank Survey correctly calling the decision.

The period of inaction by the RBA marks the longest period of cash rate stability on record, CoreLogic research head Tim Lawless said.

"The steady rate setting has a lot to do with stubbornly low inflation, record high household debt, a slack labour market and, more recently, falling dwelling values. Financial markets continue to expect that the cash rate will remain unchanged until at least January 2020," Lawless said.

While the cash rate has remained unchanged, Lawless pointed to rising mortgage rates. He said while average borrowing rates over the RBA's holding cycle have fallen 0.05% for owner-occupiers, they have risen 0.30% for investors.

"Three-year fixed rates for investors have increased by 10 basis points and discounted variable rates are up 40 basis points for investment loans. Additional mortgage rate premiums are payable for borrowers who aren’t paying down their principal. Clearly the stability in the cash rate hides a deepening complexity in mortgage products brought about by the heightened level of regulation and focus from both lenders and policy makers on improving credit quality," he said.

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