RBA watching housing market boom 'carefully', may intervene

author-avatar By on March 10, 2021
RBA watching housing market boom 'carefully', may intervene

Australia's central bank has stated it is monitoring rising house prices across the country.

Property prices rose 2.1% in February according to CoreLogic, the largest month-on-month rise in 17 years and the fifth consecutive month of increases. 

Reserve Bank (RBA) Governor Phillip Lowe said at recent meetings the board had discussed these movements in the housing market. 

"There are many moving parts at present: record low interest rates; a shift in preferences towards houses and away from apartments; strong demand for housing outside our largest cities; large government incentives for first-home buyers and home builders; and the slowest population growth in a century," Dr Lowe said.

"Time will tell as to how these various factors ultimately balance out, but history suggests that shifts in population growth can have large effects on the housing market."

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 23, 2021. View disclaimer.

Dr Lowe reiterated it was not the responsibility of the RBA to target housing prices and said it did not make sense to do so. 

"I recognise that low interest rates are one of the factors contributing to higher housing prices and that high and rising housing prices raise concerns for many people," he said. 

"There are various tools, other than higher interest rates, to address these concerns, leaving monetary policy to maintain its strong focus on the recovery in the economy, jobs and wages."

No intervention...for now

Dr Lowe said the RBA will not intervene in the booming housing market, but was continuing to pay attention to lending standards. 

"Looser standards would increase medium-term risks and add to the upward pressure on prices, so would be of concern," he said. 

"Reflecting this, the Council of Financial Regulators has indicated that it would consider possible responses should lending standards deteriorate and financial risks increase.

"We are not at this point, but we are watching carefully." 

However Westpac, which forecast house prices would rise by 20% in the next two years, believes the central bank will be forced to step in late next year and introduce Loan to Value (LVR) restrictions on investors. 

"They have clearly developed more confidence in these tools following their successful deployment in 2015 and 2017 and the RBA has already indicated these policies are an option if housing market concerns resurface," Westpac economist Bill Evans said.

It wouldn't be the first time the RBA has changed its policy position: after taking the cash rate to 0.25%, the central bank stated it was at its lower bound, before cutting again to 0.10% in November.

RBA holds firm on no rate rise until '24

A survey of leading economists by The Conversation found the majority thought the RBA would hike rates before 2024, which was the year stated by the central bank. 

Other economists from NAB and Westpac have echoed these sentiments, with many believing rising house prices would force the RBA to change its position. 

However, Dr Lowe said a hike in the cash rate before 2024 was highly unlikely. 

"As I discussed earlier, over the past couple of weeks market pricing has implied an expectation of possible increases in the cash rate as early as late next year and then again in 2023," he said. 

"This is not an expectation that we share." 

Dr Lowe pointed to record-low wage growth, protracted unemployment recovery, and stagnant inflation as factors that would prevent the RBA from achieving its goal of inflation of 2-3% and full employment. 

"This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024," he said. 


Photo by Cullen Jones on Unsplash 

Disclaimers

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): Great Southern Bank, 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.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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