Cash rate announcement as investor’s rates increase

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In a widely anticipated decision, the Reserve Bank has left the cash rate on hold at the record low setting of 1.5%.

However, investors are still facing heftier mortgages, after all major banks lifted interest rates for investors in recent weeks.

Senior bankers have further warned that the major banks will soon place heavier burdens on property investors with interest-only loans.

Meanwhile, at it’s meeting today the Reserve Bank of Australia Board decided to leave the cash rate unchanged at 1.50 per cent.

CoreLogic head of research Tim Lawless said the unsurprising move revealed that the RBA is “stuck between a rock and hard place”.

“They aren’t likely to push rates higher just to quell housing market exuberance, as doing so could push inflation lower and the Australian dollar higher. as well as cancel out some of the much needed stimulus that many sectors of the economy are benefitting from,” he said.

“On the other hand, the RBA would be loath to push rates lower out of concern for adding further fuel to an already over heated housing market.”

The cash rate is likely to remain on hold for the foreseeable future, with Lawless predicting the RBA won’t increase it or decrease it for “at least for the remainder of the year”.

“It’s looking increasingly like other factors will be necessary to undertake the heavy lifting required to bring about a housing market slowdown,” he added.

“Mortgage rates have been rising despite the steady cash rate, which will act as a disincentive to market demand.”

While the Reserve Bank may not take action, banks seem to have no issue with imposing their own rate changes.

However, while investor lending criteria is being tightened, it is expected that banks will continue to offer steep discounts to owner-occupiers to safeguard their market share, according a new report from Deloitte.

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