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RBA cash rate held again, housing prices continue to skyrocket

RBA cash rate held again, housing prices continue to skyrocket

The Reserve Bank of Australia has held the cash rate at a record-low of 0.10 per cent again at its Monetary Policy Board Meeting today.

The Reserve Bank of Australia (RBA)’s decision today to hold has been attributed to maintaining “highly supportive monetary conditions” until its goals are achieved, according to a statement by RBA Governor, Philip Lowe.

“The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range,” said Governor Lowe.

The RBA cut the cash rate three times in 2020, with one emergency cut mid-month necessary in March to respond to the economic impacts of Covid-19.

Meanwhile, housing prices are continuing to rise across the country, partially fuelled by the current low interest rate environment.

CoreLogic data released yesterday showed that national property prices grew at the fastest recorded rate since 2003 in February 2020. Nationally, dwelling values grew by 2.1 per cent over the shortest month of the year, with Sydney and Hobart both seeing capital city dwelling values spike by 2.5 per cent.

“Fomo” and low rates to blame

In a SMH article today, AMP Capital chief economist, Shane Oliver, attributed “government incentives, the unleashing of pent-up demand, the removal of responsible-lending obligations and a ‘fear of missing out’” to the surge in property market activity.

“The acceleration in home prices is likely to be starting to concern the RBA – but with average prices only just surpassing their 2017 high, growth in housing debt remaining relatively subdued at 3.6 per cent year-on-year and little evidence of a significant deterioration in lending standards at present, it and APRA are unlikely to reach for the macro-prudential lever just yet”.

New home lending also hit $28.75 billion in January, an increase of 44 per cent year-on-year (in seasonally-adjusted terms), according to the latest figures from the Australian Bureau of Statistics (ABS). ABS figures also found that the total value of owner-occupier home loans settled in January grew to a record high of $22.11 billion - up 52 per cent, year-on-year.

RateCity research director, Sally Tindall, said ultra-low interest rates have “put a rocket under the property market and it’s showing no signs of slowing down.”

“While low rates are driving current prices north, predictions of up to 20 per cent property price rises over the next couple of years are pushing people to panic buy,” said Ms Tindall.

“First it was toilet paper, now it’s property. People are rattled because they don’t want to miss out.”

How home loan rates have moved

Speaking on the housing market and current low interest rate environment, RBA Governor, Philip Lowe said: “Lending rates for most borrowers are at record lows and housing prices across Australia have increased recently.”

“Housing credit growth to owner-occupiers has picked up, but investor and business credit growth remain weak. Lending standards remain sound, and it is important that they remain so in an environment of rising housing prices and low interest rates,” said Governor Lowe.

According to the RateCity database, 40 lenders have cut 606 fixed and variable home loan rates since 1 January 2020.

Further, 14 lenders have hiked 63 home loan rates in the same time period. Currently 56 lenders are offering 151 home loan rates under 2 per cent.

If you’re looking to nab a low-rate home loan, it may be worth comparing your options – especially if you’re a refinancer. There are a range of deals on the market suited to refinancers, particularly those with LVRs under 80 per cent.

Lowest variable, owner-occupier home loan rates (principal & interest) on RateCity database 

LenderHome loanAdvertised rateComparison Rate
Reduce Home LoansRate Cutter (LVR < 60%)1.79%1.88%
Homestar FinanceStar Gold (LVR < 60%)1.79%1.84%
Pacific Mortgage GroupStandard Variable (LVR < 60%)1.89%1.89%
Northern Inland Credit UnionDream Value Package (LVR < 60%)1.89%2.28%
Easy Street Financial ServicesStandard Variable Home Loan Offer (>$750k)1.95%1.99%
Freedom LendFreedom Variable Home Loan (LVR < 70%)1.97%1.97%

Source: RateCity.com.au. Data accurate as of 02.03.2021.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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