RBA Have Made Their August Cash Rate Announcement

The RBA (Reserve Bank of Australia) has announced their August cash rate. The central bank has kept its Cash Rate on hold its record low of 1.0% as they wait for the effect of the rate cuts from the previous months (June and July) on the economy that with two 25 basis point cuts totaled to 50 basis points.

The basis point cuts came after almost 3 years without any changes, and it was linked to the weakening of the labor market and for the low inflation rate. Whereas the cash rate hold today was already expected because economists have been predicting to have up to two more cuts before this year ends.

However, further rate cuts will have no possible significant impact on the accessibility of home lending or the improvement of housing prices.

Tim Lawless, the head of research at CoreLogic, stated that “the pause in the cutting cycle will give RBA time to assess the effects of earlier rate cuts on the economy and consumer spending. The housing market has been a key beneficiary of lower mortgage rates, with a trend towards stability over the first half of the year converting to a subtle rise in capital city housing values in July.”

On the other hand, he also noted that the improvement in housing market activity is only because of the lower interest rates. That there is an additional spur of looser home loan serviceability assessments. It is in line with APRA’s decision to scrap the minimum 7% interest rate floor used to assess a borrower’s ability to repay a mortgage.

With low mortgage rates for a long period of time, and possibly move even lower later this year, it is expected to see the housing market move to recover gradually.

Lawless added that “With credit policies remaining tight and economic uncertainty still elevated, we aren’t expecting a material acceleration in housing activity or housing values.”

On Thursday the Central bank will issue a statement on Monetary Policy, which will cover the bank’s updated forecasts for economic growth, inflation, and unemployment.

Author: Shane