June RBA decision: Cash rate held but lenders move rates

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AutoInsuranceMM.Info – Low income insurance – June RBA decision: Cash rate held but lenders move rates

The Reserve Bank of Australia (RBA) has left the cash rate on hold again at 1.50%.

What’s the June 2018 RBA Cash Rate?

In its fifth meeting of the year, the RBA board agreed to leave the cash rate on hold at 1.50%.

This marks the twentieth meeting in a row the RBA has held rates steady, with the last rate movement taking place in August 2016 with a 25 basis point cut.

Experts correctly predicted today’s decision, with all 21 economists surveyed by Bloomberg forecasting the cash rate would remain on hold in June.

RBA signals “further tightening” to lending

This month the RBA noted some recovery from underlying weakness in the economy, while slow wage growth and low inflation continued to drive the Board’s stationary cash rate decision.

In his statement, RBA Governor Philip Lowe discussed housing market conditions and noted housing credit growth slowed in the past year, “especially to investors”.

After mentioning the effectiveness of the Australian Prudential Regulation Authority’s (APRA) supervisory measures and tighter credit standards to contain “the build-up of risk in household balance sheets”, Dr Lowe added there may be further changes to come.

“While there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline,” Dr Lowe said.

According to IFM Economist Alex Joiner, this referred to “potential restricted credit supply”, while the Governor’s recognition of declining average interest rates on outstanding loans indicated there was “no policy reaction needed to remedy this”.

Lenders moved rates over May despite RBA hold

Despite record low interest rates and the steady cash rate throughout May, some lenders on Canstar’s database decreased rates even further over the month.

Canstar Group Executive of Financial Services Steve Mickenbecker said lenders were reacting to competitive pressures and funding costs.

“For owner occupiers, variable rates have been on the move, with rates on 24 loans going up, while 8 have declined,” Mr Mickenbecker said.

“Fixed rates have been a mixed story with fine tuning both ways for owner occupiers, but an upward bias for interest only loans.”

Mr Mickenbecker said the story is a little different for investors.

“44 investor variable rates have moved, evenly poised between up and down, however the action has been in fixed rates where 29 loans have moved down and only 4 up,” he said.

“The banks have realised that they have overshot the target in meeting APRA guidelines and are using fixed rates to claw back market share.”

Residential home loan rate movements

Owner Occupier Principal & Interest – Home Loan Market Snapshot – May 2018
  Basic Variable Standard Variable 1 Year Fixed 2 Year Fixed 3 Year Fixed 4 Year Fixed 5 Year Fixed
Average – End of Month 4.18% 4.44% 4.05% 4.02% 4.10% 4.45% 4.49%
Min 3.58% 3.39% 3.49% 3.65% 3.69% 3.92% 3.98%
Max 5.49% 5.82% 5.14% 4.95% 5.05% 5.09% 5.09%
Decreases 2 3 0 3 4 0 2
Increases 6 7 1 1 3 1 1
Avg. Decrease -0.14% -0.13% 0.00% -0.29% -0.25% 0.00% -0.35%
Avg. Increase 0.10% 0.10% 0.30% 0.10% 0.07% 0.10% 0.10%
Average – Start of Month 4.17% 4.44% 4.04% 4.03% 4.11% 4.45% 4.50%
Source: www.canstar.com.au. Includes all eligible owner occupier and investment home loans in Canstar’s Home Loans database, available as of 1/05/2018 to 31/05/2018. Interest rates based on a loan amount of $400,000, 80% LVR, and principal and interest repayments. Based on new to bank interest rates including specials. Excludes honeymoon or intro rate home loans.

Investment home loan rate movements

Investment Principal & Interest – Home Loan Market Snapshot – May 2018
  Basic Variable Standard Variable 1 Year Fixed 2 Year Fixed 3 Year Fixed 4 Year Fixed 5 Year Fixed
Average – End of Month 4.64% 4.90% 4.37% 4.32% 4.40% 4.78% 4.81%
Min 3.79% 3.79% 3.89% 3.74% 3.89% 4.24% 4.24%
Max 5.81% 6.38% 5.15% 5.25% 5.35% 5.50% 5.60%
Decreases 3 9 3 5 3 3 3
Increases 5 7 0 0 2 0 0
Avg. Decrease -0.18% -0.19% -0.17% -0.17% -0.27% -0.17% -0.17%
Avg. Increase 0.15% 0.20% 0.00% 0.00% 0.10% 0.00% 0.00%
Average – Start of Month 4.63% 4.90% 4.38% 4.33% 4.40% 4.78% 4.82%
Source: www.canstar.com.au. Includes all eligible owner occupier and investment home loans in Canstar’s Home Loans database, available as of 1/05/2018 to 31/05/2018. Interest rates based on a loan amount of $400,000, 80% LVR, and principal and interest repayments. Based on new to bank interest rates including specials. Excludes honeymoon or intro rate home loans.