RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attemp...
The Reserve Bank has today released the outcome of its monthly board meeting for March.
Surprising no one, the RBA today held the official cash rate at its record low of 1.5 per cent.
Some of Australia’s top economists and property experts were unanimous in this month’s hold, according to comparison site Finder, with 100 per cent of their panel predicting the move.
“If [there is] another weaker-than-expected result, the odds will narrow for a pre-budget, pre-federal election cut in April or May,” Dr Wilson said.
“Although recent wages data was reasonable – not good, not bad – RBA has conditioned the market to now expect a long-needed cut to attempt to revive consumption which is now likely to also be impacted by continuing weaker housing markets.”
While the majority of the panel experts believe in a cut at 75 per cent of all experts, there are others that see the holding pattern to continue for a while, such as Real Estate Institute of NSW and managing director of Laing + Simmons Leanne Pilkington.
“There’s somewhat of a stand-off in the housing market at the moment,” she said.
“The level of buyer interest is encouraging but reduced accessibility to finance is having a dampening impact on transactional activity.
“While this issue runs deeper than merely the cost of finance, a hold pattern remains the prudent course for the RBA in the current climate.”
John Kolenda, managing director of Finsure and 1300HomeLoan, refined his prediction of the earliest chance for a rate cut occurring by a month to some time after the federal budget on 2 April.
“There are political distractions for the RBA with the federal budget handed down on April 2, the same day the central bank next deliberates on rates,” Mr Kolenda said.
“Then there is the federal election, which is due by mid-May. Like the budget, the election outcome and a potential change of government will have a significant economic impact which the RBA will need to factor in.”
Investors looking to secure finance in all of this discussion about rate cuts will find things difficult within the context of the current environment, according to Mr Kolenda.
“A rate cut seems inevitable with so many negative factors weighing down economic activity such as the falling property market, the impact of the Hayne royal commission, concerns about unemployment, the election, the US/China trade war and the Brexit debacle,” he said.
“The lending landscape has also been highly restrictive, complicated and confusing since the Hayne royal commission, with tighter lending regimes and forensic examination of borrower expenses significantly reducing borrowing power for consumers.
“We have seen a dramatic reduction in borrowing capacity for consumers with many being disheartened by the scrutiny of the major banks in analysing their expenses and activities. The average consumer qualifies to borrow 20 per cent less now than six months ago and the criteria varies drastically across lenders.”
If the potential cuts do happen, Mr Kolenda recommend existing mortgage holders to immediately review their options to see if they can find better deals.
“With the recent tightening of credit policy, I would strongly recommend they see a mortgage broker as many consumers might find themselves caught with their existing lender because their borrowing capacity has reduced dramatically,” he said to Smart Property Investment.
“Without seeking broker assistance, they might not be able to refinance to a better rate.”