Aussie Dollar Falls, RBA Holds Interest Rates
At its first board meeting of the new financial year, the Reserve Bank of Australia (RBA) decided to leave interest rates unchanged for a second consecutive month.
The official cash rate, the lowest in 53 years, remained at 2.75 per cent to counteract the recent falls of the Australian dollar but is forecasted to drop again with the slowdown of non-mining sectors.
Loan Market Director Mark De Martino said lower interest rates were injecting activity into the home finance market and suggested the prospect of another rate cut would create competition between lenders who wanted to gain market share.
“The looming federal election is creating uncertainty about exactly where the economy is heading but most lenders are anticipating further rate reductions, evidenced by their continued aggressive moves with fixed interest rates,” Mr De Martino said.
“Homeowners looking to save money should make sure their lender has been making the same competitive moves as others,” Mr De Martino said
Mr De Martino said that with a cloudy economic outlook for the next several months, fixed interest rates were particularly attractive in both price and the security of locking in a record low interest rate.
“Most two year fixed interest rate products are nearly one percent lower than variable, there’s considerable savings to be had for those who don’t anticipate variable rates averaging that in the next two years.
Mr De Martino said that prospective homeowners would benefit from the lower interest rate environment but warned borrowers that the current historic lows wouldn’t be around forever.
“When you’re setting up a budget for your home loan you should consider how future rate rises will impact your repayments. Borrowers on the standard 25 year term will see their interest rate go through many different rate cycles,” he said.