eChoice RBA Commentary for March 2018.
The official cash rate stays at 1.5% as:
• Inflation is still at 1.9%;
• The Australian dollar sits at .77c US;
• Wage growth improved marginally to 2.08%; and
• National housing market continues to slow.
With Autumn here, the colder weather has brought with it a slower property market and levels of employment and wage growth. As a result, the Reserve Bank of Australia (RBA) has left rates on hold, yet again. In fact, economists now suggest the RBA won’t make any move until the end of 2018, possibly early 2019. Although, this doesn’t mean banks won’t make independent rate changes.
What’s the bottom line? The Reserve has not made a rate move since November 2010. This stance is due to national dwelling values falling by more than 0.8% from their September 2017 peak, and slower levels of employment and wage growth placing added financial pressure on Australian households. These aspects, coupled with weaker inflation, have seen the RBA wrap March rates to put some heat back into the economy.
But, here’s the kicker: according to economists many market indicators are soft, and while there’s optimism these will change, nothing has really shown any sign of movement. Dr Lowe, RBA Governor, suggests growth will pick-up over the next few years. Employment indicators also signify job growth over this term with a gradual reduction in unemployment. Wage growth will increase as the economy becomes stronger, which should boost inflation as households pay down mortgages, and other debt, and look to spend more.
CoreLogic RP Data suggests cooling housing market dwelling values have dropped across most capitals during February. As a result, property values nationally recorded a price decline for the fifth consecutive month. Although, a 0.1% decline occurred during February 2018, compared to 0.3% recorded in January 2018.
|Capital City Home Values as of 31st January 2018|
|All Dwellings % Change|
|City||Month||Quarter||Annual||Total Gross Returns||Median Dwelling Values|
Source: CoreLogic RPData.
Falls in housing prices were recorded in all capital cities apart from Adelaide, which remained steady, and Hobart, which saw rises of 0.7%. The most significant declines occurred in Darwin, with a -0.9% fall, and in Sydney, which dropped -0.6%. However, falls in value are still considered mild, when compared to the significant price gains made over the previous years.
A cooling housing market and stable cash rate short-term for home buyers means a far more competitive market. With lenders vying for a more substantial market share they are offering more competitive rates. For instance, CommBank recently dropped fixed rates – owner-occupied 1 and 2-year fixed rate home loans fell by ten basis points. Aussie investors were the most prominent winners here though, with the CommBank’s investor interest-only 2-year fixed rate dropping by 50 basis points.
Economists now suggest the move by CommBank will encourage other lenders to revise their fixed rates. Although, with the market so competitive, financial advisors and also brokers indicate that if your home loan rate is higher than 4%, then it’s time to start looking for another loan. By using a home loan comparison calculator and reviewing the market you can work out whether or not your home loan is giving you the best value. If it’s not, and you’re paying over a percent more, then its time to discuss your options.
Are you in search of a better home loan rate? If you said YES, then discuss your options with an eChoice mortgage broker. We can help you find a competitive interest rate and see if you could save more.