RBA keeps the Rate on Hold, But Caution Ahead

Bishwas Bhattarai, Senior Lending Manager
M. Comm. (Banking & Finance) UNSW, Dip. Fin. Plan.

03 October 2017

RBa keeps the rates on hold. However with stern warning in relation to the Brisbane property market. And. new data shows slowing Sydney house prices.


It comes in as no surpise the Reserve Bank of Australia keeps the interest rate on hold for 1.5% again today. And it may be safe to say the RBA rate may be kept on hold till Christmas.

However.,with stern warning relation to Brisbane property market.

It is now the 83rd month since the last interest rate rise. Last rate rise was at November 2010.

Australian Housing market report as released by ABS suggest the average house price are not accelerating, with the exception of Melbourne and Sydney which may not there this quarter.

After 17 months first time CoreLogic data shows Sydney house price falls for the first time last month. With lower auction clearance rate, and buyers confidence.
A lot of this may also have been the result of tightening the credit crieteria, making diffcult for borrowers to acquire the property.

And this trend now is now likley to continue after this spring season.

Economist are warning the low rate days are likley to be change going into 2018 where RBA will need to raise rate gradually to ensure the Australian economy will grow on sustainable pace.
As per RBA minute it states
” Over recent months there have been more conistent signs that non-minning business investment is picking up” and other factors leading to believe the Australian economy is perfoming
on modest growth. June Quarter Australian economoy has grown by .8%.

RBA governor did made the note about Brisbane property market, as being “watched carefully” with sings on worrying apartment oversupply.

However, given the slow credit growth and improving US. economy, china’s infrastrusture and European market the lenders may be be prsesured to raise the rate independent on the RBA in near future.
Economist are predicting the rates are likley to go up from March 2018.

Given the high debt level, fuelled by rise on the median prices it is likley any rate hike will likely borrowers will struggle. As stated by RBA governor Philip Lowe

“Debt to service ratio will stay higher for longer. That is something that both borrowers and Lenders need to take into account,”.

Photo Source: The Business Insider