There are no major changes to the declaration at first glance as the RBA continues to maintain if necessary the main passage of easing policy further. This still places November as the probable timeline for the next move by the central bank if the present circumstances keep playing out. In essence, nothing much has altered, but at least the RBA recognizes some better circumstances in the housing market, but consumer debt and household debt and inflation remains a main issue for the economy.
During today’s monetary policy conference, the RBA left its cash rate unchanged at 1.0 percent. Also, the Aussie central bank sounds hopeful when it comes to expectations of jobs and economic growth while expressing worries about inflation. It should also be observed that, while staying on the “wait and see” strategy, the Aussie central bank refrains from offering any clear indications of further rate reductions.
A pick-up in growth in household disposable income and a stabilization of the housing market are expected to support spending. Signs of a turnaround in established housing markets, especially in Sydney and Melbourne. In contrast, new dwelling activity has weakened. Growth in housing credit remains low. Demand for credit by investors continues to be subdued and credit conditions, especially for small and medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality. However, at the end of the day, with interest rates at historic lows and an already weakened estate market, signs of a turnaround might come an as little surprise to those following the scenario.
“The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income and a stabilization of the housing market are expected to support spending. “Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.” According to RBA Governor Philip Lowe, interest rates could be set to drop further if necessary.
The 1.6% and 1.4% monthly value increases in Sydney and Melbourne were the biggest rises seen since April 2017, and CoreLogic research director Tim Lawless said this was likely a key topic of conversation during the RBA’s board meeting.
“Housing market conditions are responding to lower interest rates as well as the recent loosening of loan serviceability rules from APRA and the positive influence of the stable federal election outcome,” Mr. Lawless said.
Mortgage Choice Chief Executive Officer Susan Mitchell said, “My advice to borrowers who have been in the same home loan product for a while is: don’t wait to be offered a better deal on your home loan by your investment property lender, because it won’t happen. The RBA may have held the cash rate this month but we have seen a 50 basis point cut to the cash rate since June, which has made the interest rate environment extremely competitive. Lenders are fiercely competing for new customers, which puts borrowers in a great bargaining position if they are prepared to switch lenders,” said Ms. Mitchell.
“While housing market conditions are more attractive than they have been in recent times, it’s important to remember that the home loan application process is still as complex as ever and calling on an experienced mortgage broker for guidance through the process will give borrowers the peace of mind that their application is on the right track.
“For those buyers whose property investment purchasing plans are further down the track, it pays to speak with a mortgage broker who can help you determine your borrowing power, and help you apply for home loan pre-approval when you are ready,” concluded Ms. Mitchell.
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