As was widely predicted
, the Reserve Bank of Australia left the official cash interest rate on hold at yesterday's board meeting.
There had been predictions months in advance
that yesterday's meeting would result in a decrease of the cash rate, but sentiment had swung in recent weeks towards the bank leaving the cash rate at 2%.
Head of research at CoreLogic RP Data, Tim Lawless believes changes in the nation’s housing market in recent times likely played a key role in the decision.
“CoreLogic RP Data reported a 0.2% rise in capital city dwelling values in October, taking value growth to 1.4% over the past three months, which is well below recent trend,” Lawless said.
“While it is still early in this part of the cycle, the slowdown in housing market conditions is taking place at a controlled pace; the last thing the RBA would want to see is a sudden deterioration in housing market conditions or a return to the strong growth conditions that have been evident across Sydney and Melbourne over the past three-and-a-half years,” he said.
Lawless also said the RBA likely believes the current interest rates on offer to borrowers provide enough stimulus for the market, despite the recent out-of-cycle rise by a number of lenders.
“With the cash rate remaining on hold, and considering the recent 15 to 20 basis point lift to mortgage rates, the average discounted variable mortgage rate is likely to remain around the 4.8% to 4.85% mark for owner occupier mortgages, which is close to historic lows,” he said.
“This should continue to provide a reasonable level of stimulus to the housing market.”
While some borrowers may think the RBA decision has hit their back pocket, Lawless said it was unlikely the full amount of any cut would have been passed on by lenders.
“If we do see official interest rates fall over coming months, there is a high likelihood that the full cut won’t be passed on to borrowers, considering the higher capital requirements placed on residential mortgages by the prudential regulator, APRA.”
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