RBA continues to wait and see

April 05, 2022

The Reserve Bank of Australia (RBA) decided at its April monetary policy meeting to keep the nation’s official cash rate on hold at 0.10%.    

Speaking about the decision, Mortgage Choice National Sales Director David Zammit said, “The RBA remains committed to its ‘wait and see’ approach. Given this was the first monetary policy meeting since the Federal Budget was handed down, I wasn’t expecting the Board to rock the boat. However, the implications of the stimulus provided by this budget could see the first rate hike brought forward.” 

“The nation’s strong economic recovery saw the Government hand down a spending-heavy Budget 2022, which was entirely unsurprising given how close we are to the next Federal election,” Mr Zammit continued.  

PropTrack economist Paul Ryan said, “The RBA continues to be patient in assessing the persistence of inflation and is likely to wait for data releases on both inflation and wages growth later in the year. The RBA is waiting to see evidence of sustained demand in the economy consistent with inflation within its target over the medium run. But the RBA cannot look through temporary inflation forever, so there remains the possibility strong supply-shock driven inflation will force the RBAs hand. The RBA will be keenly watching that inflation expectations across the economy are not being driven by increases in the cost of living.” 

Mr Zammit said, “Unfortunately, the budget delivered little to help combat the problem of housing affordability, delivering measures that will stimulate demand rather than increase housing supply. As little as 50,000 places are being made available to first-time buyers under the First Home Guarantee and an additional 10,000 places for buyers with the introduction of the Regional Home Guarantee. The lucky few who meet eligibility criteria for the scheme represent less than a third of the number of first home buyers in 2021.” 

While there was no change to the cash rate this month there has been substantial change in the home loan market. The nation’s banks continue to compete for market share, slashing variable home loan rates, with some also offering attractive cash-back incentives to lure refinancers. As fixed rates continue to rise sharply, demand for this type of home loan product continues to fall. Mortgage Choice home loan approval data shows that in March, only 22% of home loans had a fixed component. 

“These changes to home loan interest rates, combined with increased supply saw dwelling value growth slow in early 2022 and the latest PropTrack Home Price Index showed this continued over March. In fact, the Index showed that the increase in dwelling prices across Australia over the month was at the slowest pace since May 2020. Lending indicators data from the Australian Bureau of Statistics (ABS) points to further slowing, with new housing loan commitments falling 3.7% in February. This included a fall of 8.3% in the number of commitments to first home buyers.” 

Mr Zammit said, “The first cash rate rise in more than a decade is probably just around the corner. Given there hasn't been a rise in so long, it's more likely to be an incremental and small rise. Most borrowers should be well positioned to absorb any home loan interest rate rises that may occur as a result, but they should speak to their broker if they’re concerned.”