RBA leaves rates unchanged for 13th month

The Reserve Bank of Australia (RBA) has chosen to leave the overnight cash rate at 2.5% for September.

Australia’s cash rate has remained at the record low level since August 2013.

The RBA’s decision to leave rates on hold was widely anticipated by industry members, with all 25 experts surveyed by Finder this month predicting that rates would remain unchanged.

John Caelli, general manager of markets at ME Bank predicts that rates won’t change until next year.

“The next change is likely to be a rate rise of 25 basis points in the first half of 2015. It’s likely rates will be lifted to less than the normal levels of the past, closer to 4% than 5%,” says Caelli.

According to RP Data research director Tim Lawless, the RBA is likely to keep rates at 2.5% in the coming months.

“With inter quarter measures of inflation indicating consumer prices aren’t rising rapidly, it is likely that the RBA will continue to hold interest rates at their current level for the foreseeable future,” predicts Lawless.

“With this week marking the beginning of Spring, the housing market will come under increased scrutiny to see if the seasonal surge in spring listing numbers is accompanied by an uplift in mortgage demand and buyer numbers.

“The latest indicators show that vendors remain firmly in the driver’s seat, with auction clearance rates averaging in the high 60% to low 70% range week on week and private treaty sales continuing to show a reasonably rapid pace of sale,” he notes.

The Real Estate Institute of Australia’s president Peter Bushby believes that given July’s unemployment rate rise from 6.0% to 6.4% on a seasonally-adjusted basis, low interest rates need to continue to stimulate confidence among buyers.

“Fears around unemployment are a major contributor to a decline in confidence amongst first home buyers,” Bushby says.

“According to Genworth, the First Home Buyer Confidence Index slipped from 85.0 in September 2013 to 82.3 in March 2014 – the lowest level since 2007 – with uncertainty about future employment being given as the biggest barrier to buying a first home after affordability and the deposit gap.”

Kirsty Lamont, director of banking and insurance comparison website Mozo, predicts that rates will stay on hold for the rest of the year.

“A total of 56 lenders have slashed their fixed rates since CommBank kicked off the rates war in late July, and the dust has now settled. We’ve now hit the bottom of the current fixed home loan rates cutting cycle,” Lamont says.

“The rates on the market right now are as good as they’re going to get this year, so if you’re thinking about fixing now is definitely the time to do so.”

According to Lamont, 56 lenders have decreased their fixed rate home loans since July 23.

Photo courtesy of Newtown grafitti/Creative Commons.

This article first appeared on Property Observer.