The Reserve Bank of Australia leaves cash rate unchanged


Interest rates in Australia have been steadily falling in line with the cash rates announced from time to time by the Reserve Bank of Australia (RBA), with the latest announcement that the cash rate is to remain at 1.5 percent.
This decision was widely anticipated by the market and also likely influenced by the performance of the housing market with CoreLogic’s October results also recently released. The CoreLogic Daily Home Value Index aims to measure daily movements in the value of Australian housing markets. Rather than relying solely on transacted sale prices to provide a measure of housing market conditions, the CoreLogic Daily Home Value Index is based on a ‘hedonic’ methodology which includes the attributes of properties that are transacting as part of the analysis. Understanding factors such as the number of bedrooms and bathrooms, the land area and the geographic context of the property allows for a much more accurate analysis of the true value of movements across specific housing markets. This method also allows for compositional change in consumer buying patterns when measuring capital gains.
Economic experts were divided about whether now was a good time to lock in a fixed-rate home loan. When asked if they would advise a friend that now is a good time to lock in a rate, 59 per cent said they would recommend a fixed rate, while 41 per cent advised holding out in anticipation of more rate cuts to come. Thirty-nine per cent of economists are expecting the rate to bottom-out at 1.25 per cent, with one in five predicting 1.00 per cent and one in 10 expecting it to fall even further.
Since the May rate cut this year and subsequent cut last month, many of the key housing market indicators have bounced higher. 69 per cent of the Economic Experts are tipping a rate cut in the first half of 2017.
With the cash rate on hold, mortgage rates are likely to remain at the lowest level since the mid-1960s.

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