Will tomorrow's RBA meeting lead to a cut in home loans?

While economists across the country widely agree rates are set to stay on hold at 2 per cent today, the Reserve Bank’s first meeting of 2016 will set the agenda for the year.

The pressure on our central bank to cut rates has increased in the wake of falling commodity prices and major global economic jitters about China, which means we could see a rate cut or two in the coming months.

Relatively low unemployment figures and a slight climb in December’s inflation figures have given the Board a leave pass to keep rates unchanged.  Conversly, however, the recent cooling of the housing sector, particularly in Sydney and Melbourne, will have allayed any concerns the RBA might have had about fostering a housing bubble, leaving the door wide open to future rate cuts. 

The big banks’ rate hike in October and November of last year will still also weigh on the RBA’s mind.  The fact that the majority of home loan holders are now making higher mortgage repayments than they were three months ago is something they haven’t yet forgotten.

Despite the hikes, Australians can still get rock bottom rates on their home loan, particularly if they’re prepared to switch.

Over 20 lenders currently have advertised rates under 4 per cent.  There are also around 20 lenders that have introduced special discounts and ultra low rates in the last four weeks, but only for new customers. 

With deals like this flooding the market, it’s becoming increasingly clear that 2016 is not the year for loyalty. Instead, the moral of the story is that you have to change lenders to get the cheapest rates on the market.

Related stories:

• Using equity to buy an investment property
• Apartment vs a house: which is the better investment?
• Lenders slash home loan rates in 2016

RateCity RateUlator results:

Inflation: While inflation has lifted slightly from 1.5% to 1.7%, it remains below the RBA’s target range of 2-3%, meaning less pressure to cut rates.

Stock market: After a rough start to trading in 2016 on the back of volatile Chinese markets, the ASX has stabilised somewhat. The RBA is likely to keep a close eye on global markets but will refrain from hitting the panic button straight away.

Australian dollar: The dollar has been almost as volatile as the stock market recently, but higher than expected inflation figures have brought it back to steady ground above US$0.70.

House prices: Recent data shows house prices in Sydney and Melbourne are now coming back down to earth. This will give the RBA room to cut the rate but they are likely to save that ‘get out of jail’ card for future use.

US monetary policy: The jury is still out on what affect the increase to the US cash rate has had on our market but ultimately this move has meant less pressure on the RBA to cut the cash rate.

Home loan rates: Despite recent hikes for property investors, mortgage rates remain at historical lows giving consumers a boost of confidence.

Unemployment: The unemployment rate remained reasonably low at 5.8% in January, yet another reason for the RBA to leave rates on hold.

Related links:

• Compare low interest home loans
• How much can you afford? Use our mortgage calculator
• Compare fixed rate home loans

Compare home loans in Australia