RBA leaves cash rate unchanged for sixth straight month

Belinda Punshon 3 November 2015

RBA cash rate target announcement november 2015

Reserve Bank holds cash rate at 2.0%

Results from the finder.com.au Reserve Bank Survey showed that 80% (24/30) resident rate experts correctly anticipated no cash rate movement for Melbourne Cup day, as evidenced by the outcome of today’s Board meeting.

Experts argued that an immediate cash rate cut to offset Westpac and other lenders’ decision to increase variable mortgages rates was unlikely and thus the Reserve Bank judged that holding the cash rate for November 2015 was the appropriate course of action this month.

Results from the survey found that nearly 30% of leading economists are predicting a cash rate fall by the end of the year. Of these, nearly 20% believed that the cash rate would fall at today’s Board meeting, while 10% believed a cash rate cut would occur in December this year.

However, survey participants were divided about how low the cash rate would fall- 55% of experts don’t believe it will fall below 2.0%, while 28% predict the cash rate will fall to 1.75%, and 17% expect the cash rate to dip to 1.5% this cycle.

Although all of the Big Four have lifted their variable rates for owner occupiers in recent weeks, many of the resident rate experts don’t believe the Reserve Bank will follow suit just yet. That is, more than 50% of experts said the cash rate will not increase until beyond 2016, while nearly 25% believe a rate rise will take place in the final quarter of 2016.

Why hold the cash rate?

Many of the resident rate experts in the finder.com.au Reserve Bank Survey argued that the Reserve Bank is optimistic about labour market conditions, and thus a rate move would be premature at this point in time as the new fiscal outlook is yet to be assessed.

The Melbourne Cup period is traditionally a time where the Reserve Bank makes a move with cash rates, and coupled with the out-of-cycle rate hikes by many of Australia’s major lenders, many believed that the Reserve Bank would cut rates this month to soften the blow of higher rates for owner-occupiers. However, the fact that lenders moved independently could be an indication that they believed rates would be maintained.

As the property market softens and the Australian dollar remains low, many believe that the Reserve Bank is satisfied with the status quo and will not initiate a rate movement until economic data is further reviewed.

Additionally, the Reserve Bank would not want to further fuel house prices through a rate reduction, particularly as the Sydney and Melbourne markets are beginning to cool.

Are more independent rate hikes on the horizon?

71% of resident rate experts predict more out of cycle rate changes to be announced in the months to come. Our money expert, Michelle Hutchison, says that out of cycle rate rises are likely to continue across the Australian banking sector, the impact of which will be felt by borrowers with a variable mortgage.

“Melbourne Cup day is traditionally a popular period to move rates. The cash rate has moved on Melbourne Cup day 10 times since 1991 when the modern adjustment cycle began – down four times, and up six.

“The f inder.com.au Reserve Bank Survey found that 71% of experts predict that the increase of variable home loan interest rates out of cycle – kickstarted by Westpac earlier this month – would continue across the sector. As well as the big four jumping on board this trend, St George and Macquarie Bank also have imminent rate rises, which is six banks in total”, she said.

How could a future rate rise affect my repayments?

When contemplating rate hikes, Michelle Hutchison says that you should pose the question to your lender to see whether the bank is planning to increase its variable home loan rates.

“Some lenders, however, have a tendency to keep their rate rises quiet, which can make it difficult for Australians to keep track of movements in the home loan market. It’s important for borrowers to ask the question when they are speaking to lenders or applying for a new loan to find out if they have recently made any announcements or are planning to. It’s safe to assume that more lenders will follow these banks’ leads by raising their rates too.

“Based on a $300,000 mortgage and the current average variable owner-occupied home loan rate of 5.10 percent, a rate rise of 0.18 percentage points (the average rate rise of the six lenders who’ve announced rate rises thus far) will amount to an extra $33 per month for borrowers, or potentially $396 per year or $11,880 over 30 years.

Find out how a variable rate rise could affect your mortgage repayments by entering your details in the calculator below.

“The big banks set the benchmark for what the market will do – five out of six lenders are moving on the same day as Westpac, with their new increased rates to become effective on 20 November.

“However, some smaller lenders may use this opportunity to win over new borrowers, by not following the big banks’ lead at all, or not raising their rates by as much as the market average. Regardless, it’s a great time to compare rates to see if you can get a better deal – a small change to your interest rate can save you thousands of dollars over the life of your loan”, she said.

Thinking of fixing your rate or refinancing? Compare different home loans in the table below

Rates last updated August 17th, 2017
Loan purpose
Offset account
Loan type
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Owner-occupiers can lock in a competitive rate with no ongoing fees. Conditions apply.
3.74% 4.85% $0 $0 p.a. 95% Go to site More info
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A basic home loan with a competitive rate and low fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.49% 4.47% $0 $375 p.a. 85% Go to site More info
UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
Reduce Home Loans Rate Buster 100% Offset Variable Home Loan - Up to $750k (LVR <=80%)
Borrow up to 80% LVR with no ongoing fees and a 100% offset account.
3.54% 3.54% $440 $0 p.a. 80% Enquire now More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage of a 100% offset account along with no annual or application fees.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable rate that allows borrowers to borrow a minimum of $100,000 with a $0 ongoing fee.
3.86% 3.87% $0 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
Get a competitive rate without features you may not use.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.85% 3.86% $0 $0 p.a. 90% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.69% 4.86% $0 $395 p.a. 90% Go to site More info

What about the property market?

Results from the finder.com.au Reserve Bank Survey found that 66% of experts expect property prices to rise, or remain high, despite increasing rates for variable mortgages. Nearly half, or 49% or experts, expect no change to property prices and 17% forecast that the market will remain heated, and property values will continue to soar.

Although 34% of experts predicted a fall in property prices, the majority of experts disagreed as they noted that the market is strong enough to absorb rate increases without obstructing market growth or activity.

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