Rates on Hold – October 2013 RBA Announcement

As always on the first Tuesday of the month (except January), the Reserve Bank of Australia (RBA) Board meet to determine the cash rate. As
widely anticipated, today they decided to leave the cash rate unchanged at 2.5 per cent (http://www.rba.gov.au/media-releases/2013/mr-13-19.html).

With consumer and business confidence edging higher, and the property market recovering (in some areas more quickly than others), the expectation is that the RBA will continue to watch for further signs that previous cuts are having an impact on stimulating the economy.

You may have seen commentary in the past month discussing whether we are in a property bubble, particularly with the Sydney and Melbourne markets running hot. The RBA commented in mid September that this does not necessarily constitute a bubble, and that house prices have risen at a rate equivalent to or on average less than the growth of household incomes. Interestingly though, the RBA statement today does have a masked warning that “there is ample funding for creditworthy borrowers” (my emphasis), which is consistent with their recent public caution to banks to maintain standards when approving loans. In a low rate environment, it is important to also consider loan affordability with a buffer for when rates inevitably rise. At Golden Eggs Home Loans, we discuss this with all clients.

As to the future, there are a number of indicators still slowing the economy and the RBA note that “they will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes as consistent with the target”.

Call or email us today to find out more.

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