Rates kept at 1.5% for July but will they rise soon?

Property Prices

The Reserve Bank has extended its long run of stable interest rates for another month, leaving them at 1.5 per cent today, but borrowers are being told to enjoy it while it lasts.

It is the tenth month in a row the RBA has left rates at this record-low level, they haven’t changed since August 2016.

In his statement, RBA governor Philip Lowe said there were signs the housing market was starting to ease.

“Growth in housing debt has outpaced the slow growth in household incomes,” he said.

“The recent supervisory measures should help address the risks associated with high and rising levels of household indebtedness.”

“In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades.”

While not all experts agreed with former RBA board member John Edwards’ assertion last week that we could see multiple rate rises in the next two years, an increasing number think the next rate move will be a rise.

CoreLogic head of research Tim Lawless said lenders has already started lifting their rates and it had helped to slow down the property sector.

“While the cash rate has remained on hold, the same can’t be said for mortgage rates, which have been edging higher since September last year,” he told News.com.

“Arguably, higher mortgage rates have done much of the heavy lifting in slowing down home value appreciation and cooling investment demand. There is an expectation that mortgage rates will continue to rise, despite a steady cash rate setting, as lenders adjust their credit policies to accommodate the latest round of APRA mandates.

“If this is the case, we expect investment activity will continue to moderate across the housing market, which could dampen housing market conditions further.”

RateCity.com.au chief executive Paul Marshall said the RBA needed to assess the impact on property investment from recent rate hikes from banks on interest-only loans.

“As economies around the world continue to strengthen, we are likely to start seeing interest rates move in an upward direction,” he told News.com.

“The days of cheap money could be numbered.”

Paul Dales from Capital Economics however, said the slow Australian economy would likely mean rates wouldn’t be lifted for some time yet.

“While the recent improvement in the labour market has quashed talk of further rate cuts, weak underlying inflation will prevent the RBA from hiking rates until 2019,” he told The Adviser.


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