While the experts have been predicting a year of stable interest rates, there was some uncertainty about the impact of the Federal Budget.
Unlike the Treasurer, the Reserve Bank of Australia has opted not to ripples the waters, keeping the official cash rate on hold at 2.50%p.a.
Reserve Bank Governor Glenn Stevens said continued stable interest rates would encourage economic growth.
“Interest rates are very low and for some borrowers have edged lower over recent months,” he said.
“Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little. Dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently.”
Read the full RBA statement.
RP Data Analyst Tim Lawless said the housing market was due for a slowdown, and the Reserve Bank doesn’t need to be concerned about the housing markets overheating.
“Australia’s housing market has seen two years of escalating property values, so from a cyclical perspective the housing market is due for a slowdown,” he said.
“Cooler housing market conditions shouldn’t surprise the Reserve Bank, who have been warning about overheated conditions and speculative investment activity in the Melbourne and Sydney markets.
“Gross rental yields in both these cities have fallen to near historic lows as value growth has substantially outpaced rental growth. With the heat potentially coming out of the housing market, the RBA will find it much easier to keep interest rates at their low setting in an effort to continue stimulating housing construction and consumer spending.
“Add to the recently weak housing market a stubbornly high Australian dollar, lower commodity prices, slowing dwelling approvals and weaker consumer sentiment post budget and it’s clear that the RBA is likely to hold off on rate hikes for the foreseeable future,” Mr Lawless said.
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John Caelli, General Manager Markets, ME Bank, said the result was to be expected.
“Inflation is within the target zone so the RBA can afford to wait and see the recovery unfold, noting economic growth continues to be below average, the transition to non-mining economic activity has further to go, and there will be some fiscal contraction from the budget,” he said.
“We don’t see rates increasing until at least the first quarter of 2015.”
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If you’re considering buying, are these low rates encouraging you to get in to the market? Or if you already own, will you be talking to your financial institution about a better deal?