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Out of cycle interest rate hikes are one reason the Reserve Bank of Australia (RBA) will not be lifting the cash rate, according to one mortgage broker network.
The RBA made the decision to keep the cash rate at 1.50% yesterday (4 September) after weighing up the impact on consumer sentiment and the domestic economy.
1300HomeLoan managing director John Kolenda said the rate increases independently of the central bank due to cost of funding pressures has given the RBA no choice.
He said, “The increases in rates independently of the RBA means the official rate will be staying on hold with a future downward movement from the central bank now much more likely than a rate hike.”
Not everyone agrees the next move will be a cut, however.
Eighty-eight percent of expert panellists at Finder.com.au said the next move will be upwards, although there were mixed opinions on when this might occur.
Thirty-eight percent said they believed it would be in the second quarter of 2019. Twenty-four percent said the fourth quarter of 2019 and 19% said it would not be until 2020.
Graham Cooke, insights manager at finder.com.au, said the cash rate is likely to remain at 1.5% for the remainder of the year, and part of 2019.
He said, “There are now very few predictions for a rise before the second quarter of 2019.
“It’s widely believed the cash rate will remain stagnant for some time now, but this hasn’t stopped lenders from lifting rates independently of the Reserve Bank, which we witnessed late last week.
“Westpac and Suncorp were among the first banks to increase home loan rates in response to offshore funding pressures, and many are keeping an eagle eye on the market for further announcements to come.”
RBA governor Philip Lowe released the announcement yesterday.
Lowe said, “Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low.
“Housing credit growth has declined to an annual rate of 5½%. This is largely due to reduced demand by investors as the dynamics of the housing market have changed.
“Lending standards are also tighter than they were a few years ago, partly reflecting APRA's earlier supervisory measures to help contain the build-up of risk in household balance sheets. There is competition for borrowers of high credit quality.
“The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.”
