RBA Cash Rate stabilized at 1.5%. How does this affect you?

After 11 consecutive meetings, the Reserve Bank of Australia decided to continue the cash rate steady at 1.5%. Each month, the RBA meet to determine the cash rate in order to effectively assess and respond to Australia’s current economic stance, and predicted future growth. Economists have attributed low household spending as a high level reason for the decision, a result of slow wage growth and high debt rates.

The cash rate decided by the RBA directly influences the major banks and lenders, and the interest rates they designate to commercial and personal lending. Although there is a definite influence on lenders, the market is still highly competitive, with lenders using their rates and augmented benefits of their offers to attract and maintain customers. With current economic conditions and stabilization after 11 straight meetings, interest rates are unlikely to alter significantly.

In order to address the rising housing prices, the RBA’s decision largely intends to reduce the risk of household debt associated with the slow growth in wages. The investment property trend has largely been attributed to pushing up housing prices, resulting in regulations being introduced in order to discourage buyers purchasing investment only properties. The response by lenders has largely been to increase mortgage rates for investor and interest-only loans to curb the price increase. With this mechanism in place, economists predict that price growth is expected to slow from last years 20 per cent to around 5 to 10 per cent.

Give us a call today for a further discussion how the cash rate affects you and

your personal circumstances.