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After last month’s cash rate cut, the Reserve Bank has erred on the side of caution and left rates untouched.
At its board meeting earlier today, the RBA judged it was prudent to leave the cash rate untouched.
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RP Data’s research director Tim Lawless said the decision comes as no surprise as the housing market is currently showing signs of improvement.
“The latest data associated with the housing market remains positive, providing an increasingly firm indication that households and developers are responding to the low interest rate environment,” Mr Lawless said.
“Dwelling values have continued along their recovery path, with home values half a per cent higher over in August and 7 per cent higher since the housing market started recovering in May last year. The 0.5 per cent rise in dwelling values in August is likely to provide the RBA with some comfort after values rose by a cumulative 3.5 per cent over June and July. Importantly the rise in dwelling values has been accompanied by a substantial rise in buyer numbers as well.”
Loan Market director Mark De Martino agreed and said that the already low cash rate and the easing cost of funding issues have been a “one-two punch” of opportunity for people to save money on their home loan.
“A cash rate of 2.50 per cent has resulted in home owners having the lowest interest rates since they've likely owned their current property. Additionally, the easing cost-of-funding issues have helped banks trim off their interest rates to remain competitive,” Mr De Martino said.
Mr De Martino said that the upcoming election was another important consideration for the RBA board members because of the unknown direction the economy might take after a new government takes office.
“The spending or savings initiatives promised by a new government will be important for the RBA to consider when choosing to raise or lower rates. Although key economic indicators such as inflation and employment continue to suggest another rate cut is needed this year, a new government taking office may inject the confidence needed to sway the need for more rate cuts.” he said.
