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Interest rates on hold at historic 0.1 per cent low

Published: in 🇦🇺🦘Australian News🇦🇺🦘 by .

The Reserve Bank of Australia (RBA) met today, choosing to maintain the current cash rate despite record new levels of home loan commitments and exploding property prices.

Australia's interest rates will remain at the historic-low level of 0.1 per cent as the nation's central bank reserves its hand to lift rates in the wake of record house price growth.

The Reserve Bank of Australia (RBA) met today, choosing to maintain the current cash rate despite record new levels of home loan commitments and exploding property prices.

RBA Governor Philip Lowe indicated late last year that the central bank had forecast to keep rates at 1.0 per cent for a target of three years, instead preferring other economic measures to boost spending.

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In his monetary statement today Mr Lowe said the RBA was closely watching the property market.

"Housing markets have strengthened further, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers," said Mr Lowe.

"Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained."

AMP Capital's Chief Economist Shane Oliver said while he expects rates to climb sooner than the RBA's three-year target.

"While the economy is recovering faster than expected, the RBA is still a long way away from seeing its stated requirements for a rate hike – being a tight jobs market, wages growth well above 3 per cent and actual inflation sustainably within the 2-3 per cent target range," Mr Oliver said.

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"So a rate hike is still a fair way off although I think it will come before the RBA's expectation for '2024 at the earliest'."

Mala Raghavan from the College of Business and Economics at the University of Tasmania said several key indicators need to be met before the central bank would consider lifting above 1.0 per cent.

"The cash rate will only start moving upwards when inflation and unemployment rates are comfortably above 2 per cent and below 6 per cent respectively. It might take a while to achieve these targets," Ms Raghavan said.

In his monetary statement last month, Governor Lowe said the RBA will be keeping a close eye on the property market to ensure borrowers are not taking mortgages on risky terms.

"Housing markets have strengthened further, with prices rising in most markets. Housing credit growth to owner-occupiers has picked up, with strong demand from first-home buyers," Mr Lowe said.

"In contrast, investor credit growth remains subdued. Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained."

Source: 9News https://www.9news.com.au/national/australia-interest-rates-may-2021-decision-rba-historic-low-lending-rates/551f0117-37c6-4c13-9f0b-69bb3dc757c8

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