The Reserve Bank of Australia decided to once again leave the official cash rate unchanged at 1.5% with the last rate move back in August 2016. I’d like to share today’s rate announcement and the thoughts on why the Reserve Bank of Australia has made this decision.
In making this decision the RBA looks to have taken into account the lack of economic growth in Australia, evidenced by the continued falling of house prices, a rise in mortgage arrears and a drop in the number of dwelling approvals in July.
The move to leave the cash rate on hold, rather than decrease rates, has been debated by some of Australia’s leading economists, with many Australians recently subjected to “out of cycle” rate increases. The term “out of cycle” referring in to lenders increasing rates independently of the Reserve Bank – activity we saw just last week with a large number of Australia’s lenders raising their rates and others tipped to follow suit.
Australian lenders are confronting the same dynamics of rising cost of funding and a weakening lending market. They have much more complicated funding structures including accessing offshore wholesale and securitisation markets.
Regulatory changes designed to strengthen the banking system have also seen the amount of capital lenders are required to hold increase, which means they have had to look to more expensive sources than their own balance sheets to fund loans.
With a large number of Australian lenders increasing rates out of cycle recently it is important to review your lending options regularly to ensure they remain the most suitable for your situation. There may be different rates available from our wide panel of lenders and I’m always available to ensure you have the right financial solution for your current and future circumstances.
If you’d like to have a chat about what today’s news means for you and your finances, please don’t hesitate to get in touch with an AFG broker.