Rates remain on hold as property prices continue to fall

The Reserve Bank of Australia has opted to keep interest rates on hold again as property prices in Melbourne and Sydney continue to fall.

The RBA decided to keep the official cash rate at 1.5%.

The decision is hardly surprising, given how mixed the economic data is at the moment, according to realestate.com.au’s Chief Economist Nerida Conisbee.

“The employment situation remains strong. Business investment figures released last week by the ABS continue to show that businesses are confident.

“The big problem continues to be consumers – limited wage rises, too high mortgages and rising energy costs are all contributing to low levels of sentiment and poor retail trade figures,” she said.

While most experts are expecting a rate cut soon, 46% of realestate.com.au visitors surveyed in December predicted rates would stay on hold in 2019.

Will today’s decision hit your mortgage repayment?
The RBA’s decision probably won’t make mortgage repayments cheaper for Aussie borrowers. Major lenders here are more focused on international credit markets and the cost of the banking royal commission.

Lenders have tightened credit requirements and are now closely scrutinising the spending habits of home loan applicants, which means that borrowers here may struggle to get credit or change to a cheaper loan.

The steady growth of the US economy, which rose by 2.6% in the December quarter of 2018 according to new figures released late last week, will also make some loans more expensive as lenders pass on increased credit costs.

While the RBA has kept rates at 1.5% since August 2016, some experts tip the next move on rates will be a cut.

Housing experts say that the downturn in the housing market, particularly in areas like construction will at some point force the RBA to cut rates in order to keep inflation under control.