Reserve Bank of Australia leaves cash rate untouched
The RBA has left the official cash rate at 1.50% at its June meeting.
The Reserve Bank today chose to leave the official cash rate untouched for a record 20th consecutive meeting. The result was correctly predicted by 100% of the experts polled in the finder.com.au monthly Reserve Bank Survey.
CoreLogic research head Tim Lawless said rates were likely to remain stable for an extended period.
"Financial markets are not fully pricing in a rate hike until October 2019. That is despite the latest RBA forecasts suggesting headline inflation will reach 2.25% by the end of this year and unemployment will fall to 5.25%. From a housing market perspective, a stable rate environment is positive. However, there is risk that mortgage rates could rise, regardless of the steady cash rate, due to higher funding costs being faced by lenders overseas. At the end of May, standard variable mortgage rates for owner occupiers remained at their lowest level since 1965, averaging 5.2% and the average discounted rate is tracking even lower at 4.5%. The average three year fixed rate is lower yet again at 4.15%. Even if mortgage rates do rise, they are still well below the twenty year average of 6.8," Lawless said.
But the extended period of low rates may not translate to a boost for the flagging housing market, Lawless predicted.
"Although interest rates are set to remain on hold for the time being, the availability of housing credit has tightened substantially, which is the primary driver of slower housing market activity and falling home values. The latest figures on housing credit show the monthly rate of growth, at 0.43% is the lowest since June 2013, dragged down mostly by less lending for investment purposes. Credit policies are likely to remain tight, if not even tighter, with APRA advising lenders to focus more on reducing their exposure to high debt to income loans. As a result, we expect housing market conditions to continue their slow decline, at least from a macro perspective," he said.