RBA leaves cash rate unchanged for sixth straight month

Belinda Punshon 3 November 2015 NEWS

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 20th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.66%
$0
$0 p.a.
80%
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
3.64%
3.65%
$0
$0 p.a.
80%
Low interest rate and limited fees. Add a 100% offset account for $10 a month.
3.49%
4.57%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.69%
4.11%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Frequent Flyer Points with this mortgage to spend on flights and more (subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
3.70%
3.70%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn thousands of Velocity Frequent Flyer Points on your mortgage (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.64%
3.79%
$0
$10 monthly ($120 p.a.)
70%
Low rate, low fee loan for owner-occupiers. You will need a 30% deposit to get this mortgage.
3.88%
4.40%
$0
$395 p.a.
90%
Lock in a very competitive 2 year rate and get package discounts on your credit card and offset account.
3.72%
4.10%
$0
$395 p.a.
80%
New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.
3.84%
3.84%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.65%
3.66%
$0
$0 p.a.
80%
This special rate mortgage has no ongoing fees and offers flexible repayments. Save $595 in establishment fees before 30 September.
3.98%
4.41%
$0
$395 p.a.
90%
Take advantage of a low 3 year fixed rate, 40% offset account and no application fee.
3.75%
3.75%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.72%
3.74%
$0
$0 p.a.
80%
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.54%
3.59%
$0
$0 p.a.
80%
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility.
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.68%
3.70%
$0
$0 p.a.
80%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.62%
3.62%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
3.65%
3.66%
$0
$0 p.a.
90%
Competitive interest rate and low fees. Available with a 10% deposit. Partial offset account attached (offset up to $15,000).
3.75%
4.00%
$0
$248 p.a.
70%
Borrowers with a 30% deposit can get this competitive rate.
3.64%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.67%
3.69%
$0
$0 p.a.
80%
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.85%
3.85%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan. Split and redraw facilities included.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.64%
3.69%
$600
$0 p.a.
80%
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
3.72%
4.11%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
3.74%
3.80%
$0
$0 p.a.
80%
Fast, 100% online application process. Very limited fees. Optional offset account (with fee).
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.89%
3.94%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.77%
3.79%
$600
$0 p.a.
90%
Buy your home with just a 10% deposit, few fees and a reasonable interest rate.
3.93%
3.94%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
3.64%
3.79%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.69%
4.54%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
4.09%
4.11%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
3.89%
4.94%
$595
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
4.24%
4.27%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
4.14%
4.81%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
3.68%
3.69%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.

Compare up to 4 providers

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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