RBA leave cash rate on hold at September meeting
The RBA has held interest rates at a record low 0.1 per cent at its September meeting.
RBA Governor Philip Lowe's said that housing prices are continuing to rise, although turnover in some markets has declined following the virus outbreak.
"Housing credit growth has picked up due to stronger demand for credit by both owner-occupiers and investors, Lowe noted.
"Given the environment of rising housing prices and low interest rates, the Bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained."
In Finder.com.au's monthly RBA Survey, AMP Capital chief economist Shane Oliver said the lockdown and its hit to the economy has further delayed the time when the effective RBA conditions – full employment and 3% or more wages growth to sustain 2-3% inflation – will be met to justify a rate hike.
Commentator Saul Eslake said he takes the RBA at its word when it says it won't begin tightening monetary policy until the labour market is sufficiently tight to generate wage inflation that's sufficiently strong to push 'underlying' consumer price inflation sustainably into the 2-3% target range.
"While I think that may well be sooner than the RBA's ‘central case’ of 2024, I don't think it will be any earlier than mid-2023," Eslake says.
Dr Andrew Wilson from My Housing Market says that no change in fundamental economic weakness confirmed again with low wages growth despite robust labour market.
"As usual – absolutely no plausible case on current data for higher rates over the foreseeable future – and then there is Covid."
New research from Finder reveals that over half of homeowners across the country are concerned about interest rates increasing in the near future.
Around15% fear they may not be able to make their repayments once rates creep up.
Finder.com.au's head of consumer research Graham Cooke says some homeowners may have purchased beyond their means in the midst of the housing market frenzy.
“The past 12 months have seen property prices explode as record numbers of Australians have fled into the housing market," Cooke says.
“Low interest rates have encouraged many buyers to purchase earlier than they otherwise might have for fear of missing out.
“But not all of them will have budgeted for their monthly repayments to go up if or before the cash rate increases,” Cooke said.
Finder analysis reveals the average monthly mortgage payments in Sydney are worth 76% of the average worker’s after-tax earnings – the highest in the country. Melbourne (57%) is not far behind, followed by Canberra (49%) and Hobart (49%). Perth is at the bottom of the list, with the average mortgage costing a more reasonable 35% of average earnings.
