The Reserve Bank of Australia has kept the official cash rate on hold at its record low for May, marking a nine month run at 2.50%p.a. The bank maintained the status quo at its monetary policy meeting today, citing rising unemployment and a decline in the resource sector.
“Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments,” RBA Governor Glenn Stephens said. “Credit growth has picked up a little, while dwelling prices have increased significantly over the past year.”
But despite a steady outlook, borrowers are being warned to watch their lenders closely for changes to the variable rate on home loan products – as several have moved this year, even though the official rate has held firm.
Michelle Hutchison, Money Expert at finder.com.au said the website found five lenders increased their rates on seven home loans by up to 0.10 percentage points this year, including Citibank, HSBC and Westpac. “We’ve also seen seven lenders drop 20 home loans this year by as much as 0.17 percentage points,” she said.
RP Data Research Director Tim Lawless said the latest housing market results from RP Data and Rismark would have given the RBA some comfort. He said capital gains across the nation’s housing markets were starting to return to more sustainable levels after a solid growth run, where capital city dwelling values rose a cumulative 16.1% since the growth phase started back in June 2012. “The April results showed a slowdown in dwelling value appreciation, up just 0.3% over the month, which is likely to be a welcome result after such previously strong conditions,” Lawless said.
“The ongoing low interest rate environment is likely to encourage higher levels of housing market activity which provides a fantastic multiplier for the Australian economy; however we anticipate that natural affordability barriers and low rental yields will continue to dampen the exuberance that has been very much evident in Sydney and Melbourne.”