RBA leaves cash rate on hold in March

THE Reserve Bank has kept the official cash rate on hold for its second meeting of the year, marking 19 months in a row at its record low of 1.5 per cent.

THE Reserve Bank has kept the official cash rate on hold for its second meeting of the year, marking 19 months in a row at its record low of 1.5 per cent.

The RBA last cut the cash rate in August 2016, following an earlier cut to 1.75 per cent in May. There has not been an official cash rate increase since November 2010.

With a cooling housing market courtesy of a crackdown on investor and interest-only lending, most experts believe rates won’t rise until some time next year.

“The controlled slowdown in housing markets, driven by subtle falls across Sydney and Melbourne, have eased pressure on the RBA to lift rates in order to quell housing market exuberance,” CoreLogic head of research Tim Lawless said in a note on Tuesday.

“Higher on the RBA board’s agenda is likely to be inflation and employment. Year-ended inflation averaged just 1.9 per cent over 2017, and the unemployment rate was 5.5 per cent in January, up from 5.4 per cent in November last year. Continued low wages growth (2.1 per cent), and the outlook for the Australian dollar and commodity prices will also be important considerations.”

Mr Lawless said a “soft landing” for the housing market, which appeared to be underway, was a likely to be a “very welcome outcome” for the RBA.

“We have macroprudential policies to thank for softer housing market conditions — investment activity has reduced and lending policies are firmer,” he said. “The by-product has been weaker market conditions in the cities where investment activity has been concentrated — Sydney, and to a lesser extent, Melbourne.

“Dwelling values in Sydney have reduced by 3.7 per cent since peaking in July last year and Melbourne vales are 0.4 per cent lower since peaking in November.”

Steve Mickenbecker, group executive of financial services at comparison website Canstar, said now was a good time to consider fixing your interest rates.

“Confident of a no move result, the two market leaders haven’t waited for the Reserve Bank, announcing changes to their fixed home loan rates a couple of days early,” he said in a statement.

“The hope for consumers is that CommBank reducing a range of fixed rates could set off a rate reduction frenzy. This would reverse the movement Canstar has tracked during February where fixed rate increases dominated. Even more interesting is the CommBank’s biggest reductions are to investors, and even extend to interest-only investors.

“Consumers should be thinking about the right time to fix, but with a range of variable rates for owner-occupiers paying principal and interest also at unprecedented lows, it is now time to be looking for a rate starting with a three.”

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Originally published as RBA leaves cash rate on hold in March