The official cash rate for July has been announced by the Reserve Bank of Australia following its monthly board meeting.
The RBA board has once again decided to hold the cash rate at its current record low of 1.5 per cent, in a move predicted by most industry pundits.
None of the surveyed respondents on finder.com.au’s panel of industry experts predicted a rate change, while over 95 per cent of brokers surveyed by marketplace lender HashChing expected to see a hold, down from 98 per cent last month.
The decision to hold the cash rate at 1.5 per cent sees the cash rate being held for 21 meetings in a row, surpassing the previous record in 1995 to 1996, where it remained unchanged for 17 meetings.
It comes amid an economic landscape of falling house prices — particularly in the once overheating Sydney and Melbourne markets —, uncertainty about the fallout from the banking royal commission and pressures on lenders to raise interest rates independently of the RBA as funding costs rise.
Tim Lawless of property analytics firm CoreLogic also predicted a hold. However he has pushed back his expectations when rates will begin heading upwards again to November 2019, from October.
“Economic conditions remain reasonably stable, housing market growth continues to slow, household debt is at record highs, and inflation remains around the lower end of the RBA target range,” Mr Lawless said.
“With this scenario as a backdrop, the hold decision today from the RBA was widely anticipated.”
By and large, finder.com.au’s panel overwhelmingly stated that the conditions are just not in place yet to see a rate change.
Nerida Conisbee from REA Group said that while businesses are confident in the current economy, consumers are not.
“Until this turns around, I think it is unlikely we will see an interest rate rise,” Ms Conisbee said.
Capital Economics’ Paul Dales claimed the RBA is more concerned about the results of the banking royal commission, as well as how the US-induced global trade dispute plays out.
“There are still very few signs that inflation is going to rise back to the middle of the RBA’s 2 [to] 3 per cent target,” Mr Dales said.
Despite a steady cash rate, John Kolenda, managing director at 1300HomeLoan, said mortgage holders are experiencing out of cycle rate increases from many lenders due to funding pressures and regulatory requirements, which means trying to borrow is going to become even harder.
“Borrowing capacity for consumers has dropped up to 30 per cent over the past quarter and the borrowing parameters vary by lender, making it very challenging for borrowers to understand how much they can borrow and from whom,” Mr Kolenda said.
“Cost of funding issues has forced some lenders to increase the rates of some home loan products by more than 30 basis points, while other lenders play a wait-and-see game under the spot light of the Hayne Royal Commission, but they have the same pressure to increase rates out of cycle.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
Ask the Experts: Does automation stack up financially?
By Christopher Overton
Opinion: How bad do things have to get?!
By Adam Zuchetti
Business lessons from the All Blacks
By Steve Stanley