RBA leaves cash rate on hold at 1.50 per cent

In a move widely predicted by economists, The Reserve Bank of Australia (RBA) have left the cash rate on hold at 1.50 per cent at the July Board meeting. 

The last cash rate change was almost a year ago in August 2016, when rates were cut by 25 basis points.

Governor Philip Lowe said in a statement made today that this decision comes in response to GDP growth slowing in the March quarter, employment growth staying strong, low level interest rates and a varying national housing market.

“Conditions in the housing market vary considerably around the country,” said Governor Lowe.

“Housing prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease. In some other markets, prices are declining.

“Growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of household indebtedness.

“Lenders have also announced increases in mortgage rates for investor and interest-only loans,” said Governor Lowe. 

Investors told to slow down

These supervisory measures are a reference to the recent regulations put in place by APRA to slow down the amount of investor and interest-only loans that banks are able to have on their books.  

RateCity.com.au CEO Paul Marshall said the decision reflected the need to wait and see how the APRA led intervention plays out in the housing market.

“The Reserve Bank needs more time to monitor the impact of rate increases for investors paying interest-only,” said Mr Marshall. 

“Over the last month we’ve seen the interest rate gap between the average owner-occupier paying principal and interest and investor paying interest-only widen by an estimated 0.67 percentage points, according to our latest data.

“There is now a clear incentive for investors paying interest-only to swap to principal and interest loans.

“However, for those investors who want to keep paying interest-only, there are still some good deals being offered by smaller lenders, but not for long.

“Owner-occupiers paying principal and interest have been given some reprieve with recent rate cuts led by the big banks, but we would caution them against becoming too complacent.

“As economies around the world continue to strengthen, we are likely to start seeing increases in our cash rate. The days of cheap money could be numbered.” said Mr Marshall.

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