Next move will be up
This will bring the rate closer to where it was at the beginning of this year.
As deferrals go, this is a disappointing situation for borrowers.
The Central Bank is non-committal on rate hikes, but at the press conference following its decision to keep interest rates steady on Tuesday there was no suggestion that the outcome of the board meeting would be a coin toss.
He stated that the possibility of a rate cut is not on the table, but the board of directors is speculating a little about future interest rate increases.
The RBA doesn’t like to scare the horses, but it did give a clear hint that: As the Yazz song progresses – Tits only way up.
Citi economists noted that the RBA board “does not want to alarm households, preferring to give data more time to confirm emerging concerns or prove that this is a short-term blip in Australia’s economic recovery.”
For the 3.3 million households with a mortgage, this will destroy any hope that their budgets will increase next year due to the decline in loan servicing costs.
Of course, most households pushed aside interest rate cuts this year and applied them to offset accounts.
But on the sidelines, there are borrowers trying to ease mortgage stress.
The 3 per cent servicing buffer for borrowers imposed by the Australian Prudential Regulation Authority is likely to continue to protect lenders from meaningful increases in mortgage defaults.
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There’s also a group of potential borrowers waiting to apply for mortgages, given that rates are moving lower, or at least not rising.
The RBA decision is almost certain to deal a blow to the housing bubble that has developed this year and has been blamed by property investors.
Signs are already emerging that some of the heat is gone from the real estate market, with auction rates dropping rapidly in recent weeks.
Prices may not fall during the December/January holiday season, but the growth rate is already starting to decline.
The RBA did not mention the impact of rising interest rates on the property market or the impact of this year’s three cuts on the formation of bubbles.
He prefers to characterize fluctuations in house prices as a result of housing supply.
For borrowers, it will feel like an eternity between February and February, when the RBA will reconvene with new data on how inflation and the labor market are doing.
The Christmas spending season will be one to watch.
