Reserve Bank holds cash rate at 1.50% at September meeting

Posted: 4 September 2018 2:30 pm
RBA generic CF

Talk of a future rate rise is cooling as signals begin shifting towards a lower cash rate.

The Reserve Bank Board today chose to leave the official cash rate on hold at 1.50% for the 25th consecutive month. The result was tipped by 100% of the experts polled in the Reserve Bank Survey.

CoreLogic research head Tim Lawless said Westpac's recent announcement that it would raise variable rates may have shifted the trajectory for the official cash rate.

"There are plenty of factors keeping interest rates on hold, but top of mind is the fact that mortgage rates are already edging higher as lenders look to balance their profit margins against higher funding costs and a smaller deposit base. With the first of the Big Four banks announcing an out of cycle rate hike, the prospects for a higher cash rate have likely been pushed back even further; we could even see debate for a lower cash rate becoming more prominent," Lawless said.

Lawless said the cash rate was likely to remain on hold until at least January 2020. However, he said the home loan market was set to remain dynamic.

"Despite the outlook for a stable cash rate, but slightly higher mortgage rates, we can expect lenders to remain hyper competitive, particularly for high quality borrowers – those with large deposits, lower debt to income ratios and a strong credit history. Even with mortgage rates starting to edge higher, from a historical perspective, rates remain extremely low which will continue to support housing demand. No doubt borrowers will be applying pressure on their lenders to ensure they are on the lowest rate possible."

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