Home loan interest rates on existing mortgages and new loans from many lenders are not expected to change with the RBA August decision to hold the cash rate. What can buyers looking to capitalise on the current fall in property prices take from the latest RBA decision? What do three rate increases and now two holds this year reveal about what’s next?
The scenario is far from clear cut except that a rate cut is extremely unlikely in the near future. In the media conference held after the August 11 decision was released, the Governor of the Reserve Bank, Michele Bullock, said a rate cut was not discussed at the meeting. But a rate rise was discussed as well as the eventual hold.
We unpack the latest RBA cash rate decision and provide an update on the home loan interest rate market and how we assist buyers to secure their most affordable mortgage.
Reserve Bank August Interest Rate Decision
The RBA Monetary Policy Board held its scheduled meeting to discuss the cash rate over August 10-11. The Board’s decision was to leave the current cash rate of 4.35% unchanged. In the media statement announcing the decision, RBA Governor Bullock said that the current rate of headline inflation remained too high. Ms Bullock noted that the Middle East conflict has so far had less effect on inflation that was expected. But the higher fuel prices were causing businesses to pass on their increased costs in their prices, contributing to inflation.
The Board expects that the rate of inflation will continue to stay at a high level for some time before returning to midway in the RBA’s 2-3% target range late next year. With inflation still too high and uncertainties stemming from the Middle East conflict and the rate of economic activity, the Board determined a rate hold was most appropriate at this time.
Future rate decisions will be guided by the data available and the forecasts. The Board has not ruled out announcing an increase in the cash rate if the conditions require that action. An important data set for the next rate decision may be the next inflation figures which will be released by the ABS on August 26.
The Reserve Bank Monetary Policy Board will make three further decisions on interest rates this year – 29 September, 3 November, the traditional Melbourne Cup Day decision, and on December 8.
More detail on what is discussed at these Board meetings may be gleaned from the Minutes of the meeting which are posted to the RBA website about 2 weeks after the meeting. The August meeting minutes will be available online on 25 August.
Home Loan Interest Rates Market
The mortgage rate market is very much determined by the RBA rate decision with banks and other lenders typically changing their mortgage rates very soon after increases and cuts to the cash rate. But there can be other factors contributing to any one lender being more competitive than others.
The home loan market is the largest sector in the Australian lending industry. Many banks and other lenders are active in the sector and that can lead to a very competitive market. At the moment, a number of factors may indicate that competitive rates could be available.
With property prices falling, there would be a logical expectation that there would be more buyers in the market. But that is not the case. According to reports from the ABS and major banks, lending has slowed in the home loan market. This may be due to numerous factors.
Tax changes to investment properties announced in the Budget appear to be having a significant effect on the market.
Higher costs of living and higher rates have reduced the borrowing power of many loan applicants. Lenders scrutinise living expenses when assessing applications and increased costs for many goods will be pushing up applicants’ outgoings, leaving less to cover a mortgage payment.
The three rate hikes earlier this year will be leaving applicants with a lower borrowing capacity than they would be offered at a lower rate. This may mean less to buy or having to reduce expectations as to what to buy.
While property prices have reduced, the three rate rises earlier this year appear to have left many prospective buyers with cold feet. The uncertainty of what may or may not lie ahead, worrying many about meeting repayments and not falling into negative equity, should property values fall further.
While all that can sound extremely negative, for those who are in a position to buy, it may be a positive. Mortgage lenders can be even more competitive in what is already a very competitive market! But finding which lender or lenders are offering the most competitive home loans and which suits your profile can be the challenge.
Lenders may not always want their existing customers to know they are offering more competitive deals on new mortgages or refinancing. Using our expert mortgage broker services may assist you by having the most competitive option found for you.
How We Help with Home Loan Interest Rates
Whether looking to invest in property despite the tax changes announced, or buying your first home using our expert brokers may be the help you need. We provide assistance with completing the mortgage application form, advise on options for the most suitable type of loan, and source the most affordable mortgage rates.
To have your most competitive home loan rates sourced for you, connect with Yes Home Loans on 1800 000 937.
DISCLAIMER: THE INTENTION OF THIS ARTICLE IS TO PROVIDE INFORMATION OF A GENERAL NATURE ONLY. THE ARTICLE IS NOT PROVIDED WITH THE INTENTION OF BEING THE ONLY SOURCE OF INFORMATION ON WHICH PROPERTY BUYERS SHOULD MAKE THEIR DECISIONS. BUYERS WHO NEED GUIDANCE AND ADVICE ON PROPERTY LOANS BASED ON THEIR INDIVIDUAL CIRCUMSTANCES ARE ADVISED TO CONSULT WITH A SPECIALIST MORTGAGE BROKER OR FINANCIAL CONSULTANT. NO LIABILITY IS ACCEPTED FOR MISREPRESENTATION OF FOR ANY ERRORS IN DATA, POLICIES AND SPECIFIC DETAILS THAT HAVE BEEN OBTAINED FROM OTHER SOURCES.