RBA holds rates for longest time in 10 years
At its October meeting the Reserve Bank of Australia (RBA) announced it will keep interest rates at 2.50%, extending its long period of rate stability to 14 months of no change.
Loan Market Chairman, Sam White, says the consistency of the official cash rate (OCR) is great for first time buyers and homeowners alike, as the property market continues to remain strong.
“Spring is traditionally a time for people to be on the move and the fierce competition among lenders, offering extremely low fixed rate products and even cash incentives, means consumers now have more options than ever to secure the best deal.”
However, with recent findings showing over one in three home loans being financed as interest-only, Mr White warns of the dangers of getting in over your head.
“With such low rates on offer it’s tempting to borrow big and let the banks dictate your debt level. The best way to avoid this is to use the services of a mortgage broker who will work with you to understand your objectives and explain both your options and your obligations.”
“An even better strategy is to take advantage of this steady period to pay down as much debt as possible. Fix your rate lower for the short to medium term and own your home sooner,” Mr White says.
In recent weeks there has been talk of the RBA introducing macro prudential measures, whereby restrictions are put in place on high risk lending rather than raising rates, as a way to slow down the strong real estate market.
“Broadly we support this way forward. However, we’d urge the RBA not to penalise first home buyers from entering the market, as has happened recently in New Zealand,” Mr White concludes.
Continuing to combat the effects of a high Australian dollar, a booming housing market and a decline in non-resource sectors, the 14 month rate hold is the longest in over 10 years.
The RBA meets again on 4th November.