RBA keeps promise, holds rates

Extending one of the longest chapters of interest rate stability in decades, the Reserve Bank of Australia (RBA) decided to keep the cash rate at 2.50 per cent for May this afternoon.

For the ninth consecutive month the RBA the cash rate will remain at an all-time low to help combat the effects of a high Australian dollar and the growth of non-resource sectors.

Loan Market director Mark De Martino said the RBA has been very clear in its mandate to create growth in an economy with forces pulling it in opposite directions.

“The cash rate has been under 3 per cent for a full year now - we’ve never had rates so low for so long. The combination of historically low interest rates and rate stability are helping homeowners and buyers build confidence in the property market.

“The RBA has made it clear the high Australian dollar is negating some of the pressures to move rates upwards and it’s unlikely we’ll see a rate move in the next few months. Chances are we will go a full year without a rate movement,” Mr De Martino said.

Mr De Martino said banks were also sending mixed signals about their interest rate predictions, with fixed rate products dropping for some and rising for others.

“Lenders are trying to anticipate when or if the downward trend for interest rates has finished and when it will start to cost more to borrow money. The enquiry we’ve seen for fixed rate products has never been higher,” he said.

Mr De Martino said that nearly one in two home loan enquiries at Loan Market were about fixed rate products.

“Although the next rate movement is uncertain, both for time and direction, home owners and buyers are seeing lots of savings in fixed interest rates. Most fixed rate products are sitting a full percentage below standard variable rates.

“Ultimately what is persuading many borrowers to take the fixed route is that they don’t see variable rates averaging what fixed rates would over the term of the loan,” Mr De Martino said.

Mr De Martino suggested borrowers looking for a home loan should speak to a mortgage broker who can give them an overview of the most competitive products on the market and recommend the loans that are suitable for them.