RBA holds interest rates steady after shock May cut

Angus Kidman 7 June 2016
 

No changes for June, but most economists anticipate further cuts before the end of the year.

The Reserve Bank of Australia (RBA) has held the official cash rate at 1.75%, opting for a "steady as she goes" approach after last month's unexpected cuts led to almost every lender trimming their variable rates for home loans.

No change was expected, with 100% of the economists surveyed for finder's monthly RBA rate survey predicting that rates would be unchanged this month. Historically, it has been rare for the RBA to change rates two months in a row. The Federal election campaign is likely to have further dampened any enthusiasm for a rate cut this time around.

However, it's widely anticipated that rates will drop further before the end of 2016. More than two-thirds (68%) of experts surveyed by finder are predicting a fall this year, with August tipped as the most likely month.

The May cut followed 12 months of unchanging official rates. Most lenders responded by passing on all or most of the cut to variable-rate mortgage customers, as you can see in finder's full round up of all the rate adjustments that happened in May. While the Big 4 banks all made cuts, most held off for a few days or weeks, a move which meant at least $21 million extra in repayments.

Unfortunately, falling rates won't necessarily make it more affordable to purchase a property. 65% of economists surveyed by finder are predicting house prices will rise by at least 5% before 2020.

Picture: Shutterstock

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