Despite many predictions to the contrary, the Reserve Bank of Australia met today and decided not to raise the official cash rate again. Good news, and quite unexpected, for all of us mortgage holders out there who had been expecting to see another rise in interest rates.
All the news reports and predictions had been saying that the Reserve Bank would take the unprecedented step of raising rates again. When it comes to interest rate rises for our mortgages, I’ve sounded like a broken record lately. Rates rose in October, then there was the Melbourne Cup rate rise of November 2009, and the Merry Christmas rate rise of December 2009. Since the Reserve Bank takes a holiday every January from their official board meetings, we were spared a New Year rate rise but all the money today was on the Reserve Bank making the unprecedented decision of increasing the rate again, which would have set a record of rises at four consecutive meetings.
So why did the Reserve Bank go against expectations today? Perhaps they were feeling a little kindly, but it’s also because they’ve noticed many major banks have been passing on more than just the increase set by the Reserve Bank. The official statement from Governor Glenn Stevens just announced that the rate will stay as it is, at 3.75 per cent, giving these reasons:
Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point. Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being.
Of course, this certainly paves the way for future rate rises so our sighs of relief shouldn’t be too large – perhaps a March rate rise is almost inevitable. But for now, the Reserve Bank has given mortgage holders a small bonus of not having an increase in repayments this month. At the same time, we should be pleased with the good news that our homes are probably worth a bit more – in the December quarter, average housing prices grew by an impressive 5.2 per cent. No rate rise, more value – we can’t complain about that.
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