The Reserve Bank has left interest rates on hold for another month, keeping them at the record-low 0.1 per cent at this week’s meeting.
Our official cash rate has been at this level now since November 2020 when the RBA tried to soften the blow of the coronavirus pandemic.
In his official statement, governor Philip Lowe said Australia’s economy was recovering well.
“Housing markets have strengthened further, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers,” Mr Lowe said.
“There has also been increased borrowing by investors.
“Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
AMP Capital’s Shane Oliver told Nine News the stagnant wage growth in the economy was the reason behind inflation’s stubborn refusal to hit the RBA’s 2-3 per cent target before they lift rates again.
“While the economic recovery is faster than expected, the RBA’s conditions for a rate hike are still far from being met,” Mr Oliver said.
“The jobs market is still a long way from full employment, wages growth at 1.5 per cent is way below the 3 per cent plus pace necessary to sustain 2–3 per cent inflation and in any case inflation is still well below its target zone.
“So a rate hike remains some time off.”
While the RBA’s official cash rate stays still, longer term fixed rates at the banks are rising.
RateCity says there were now no more four-year fixed mortgage rates on the market for less than 2 per cent.
“We expect more fixed rates will rise after the RBA’s term funding facility wraps up at the end of this month and we edge closer to the next cash rate hike,” RateCity’s Sally Tindall told Nine News.
Financial research firm Canstar said relatively few people had so far made the move to refinance their loans to cash in before rates inevitably go up.
“The dilemma for mortgage holders is not so much trying to secure a cheap rate but more so paying off as much as they can now to secure themselves a buffer before rates do go up,” Canstar’s Effie Zahos told the ABC.