Image source: RBA
Image source: RBA
The Reserve Bank of Australia has decided to hold the official cash rate steady at 0.25% in its board meeting today.
Today's board meeting was one of the most anticipated in recent months with the possibility of a cut looking increasingly likely after comments from RBA Deputy Governor Guy Debelle.
But Australia's official cash rate will remain unchanged in October, with the RBA likely deciding to hold fire because of the Federal Budget, set to be delivered at 7.30pm (AEDT) tonight.
Looking to compare low-rate, variable home loans? Below are a handful of low-rate loans in the market.
Product Features Monthly repayments:
$1,476 Advertised Comparison Product Features Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
Smart Booster Home Loan
Monthly repayments: $1,476
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
Economists had widely predicted this would be the case, with a Bloomberg poll revealing 20 out of the 24 economists surveyed had predicted no change to the official cash rate in October.
Today's decision marks the seventh consecutive month without a cut following a turbulent March which saw two rate cuts and the implementation of a quantitative easing program as the RBA resorted to emergency measures to soften the economic blows of COVID-19.
Speaking about the decision, Reserve Bank governor Philip Lowe said despite the economy entering its first recession in 29 years, a substantial easing of fiscal policy has supported the economy.
"Public sector balance sheets in Australia are in good shape, which allows for continued support, with the Australian Government budget to be announced this evening," Dr Lowe said.
"Both fiscal and monetary support will be required for some time given the outlook for the economy and the prospect of high unemployment."
Lowe said the RBA's policy package is "working as expected" and underpinning very low borrowing costs and the supply of credit to households and businesses.
"There is a very high level of liquidity in the Australian financial system and borrowing costs are at record lows," Dr Lowe said.
He also said the Board is committed to doing what it can to support jobs, incomes and businesses.
"The Board views addressing the high rate of unemployment as an important national priority," he said.
"It will maintain highly accommodative policy settings as long as is required and will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3% target band.
"The Board continues to consider how additional monetary easing could support jobs as the economy opens up further."
Place your bets on Melbourne Cup rate cut
This would take the official cash rate to a new record low of 0.10%.
Westpac economist Bill Evans had previously been forecasting a rate cut in October before backflipping and revising his forecast of a rate cut for November instead.
Evans said this was because cutting the official cash rate on the same day as the Federal Budget could be seen as being politically motivated.
"A central bank moving on Budget Day could be interpreted by the government and the bank itself as diverting attention away from the Budget and complicating the government’s task in “selling” the Budget," Evans said.
"So in the eyes of the authorities, there was probably a trade-off between a “Team Australia” moment and the government having the clear air to sell its Budget without any distractions from other policy makers."
Speaking about today's RBA decision, Mortgage Choice CEO Susan Mitchell said RBA Board members are waiting to see what is delivered at the Federal Budget tonight before making changes to the official cash rate.
“The highly anticipated 2020/21 Budget is expected to provide stimulus to support the nation’s economic recovery in the form of tax cuts, infrastructure investment, renewed JobSeeker and JobKeeper policies and an expanded HomeBuilder Scheme," Mitchell said.
“The Government has already announced the extension of the First Home Loan Deposit Scheme. This will enable an extra 10,000 buyers who build new homes to get into the property market with a deposit as low as 5% from October 6 until June 30 2021. The Government expects the scheme to drive more construction and support job growth.”
CoreLogic head of research Tim Lawless said the decision to cut rates next month could hinge on what's delivered in tonight's Budget.
"The focus now will be on whether the stimulus measures announced in the budget tonight are enough to offset the tapering of JobKeeper and the effect of higher mortgage arrears as home loan repayment deferrals become less prevalent," Lawless said.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
- If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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