RBA Cash Rate Decision October 2019

RBA Cash Rate Decision October 2019

RBA board has met on Tuesday the 1st of October 2019 for their cash rate decision and decided to cut the rate by 25 basis points to an official rate of 0.75%. This represents a record low cash rate for the RBA.

Growth in Housing Market

Conditions in the Sydney and Melbourne housing markets have continued to remain soft but recently the pricing has stabilised with green shoots. Growth in housing credit extended to owner-occupiers has stabilised, whilst credit to investors has remained subdued.

From the last rate cut, we saw lenders pass on between 18 to the full 25 pts in a rate cut saving. Important to note this reduced the cost of variable loans, customers on fixed loans will not experience the passed on interest savings. You can read more about the refinancing process or the process of purchasing a new property.

It is yet to be seen that a rate cut would stimulate the credit and housing markets, similar to what occurred in late 2016, we have witnessed a bounce in some property markets post election. Recently APRA made changes to the assessment guidelines for Australian lenders, which should assist in the demand for new housing credit.

Australian Economy

The Australian economy grew below-trend at 1.4% to June 2019 quarter. This was weaker than the expected outcome. Household consumption has been affected by a weakness in housing markets and low-income growth. The labour market is strong with the unemployment rate is 5.25%, with minimal pressure on wage growth.

Inflation

Inflation across the country has been lower than expected, with target inflation expected to be a little under 2% over 2020. These inflation targets have been revised down from previous RBA expectations.

The RBA board made the decision to cut rates by 25 points, to assist in a further reduction in unemployment and achieve the revised inflation target.

To Read More at the RBA: RBA Rate Decision click here

Jeremy Harper is the director of hfinance. hfinance is a mortgage brokering business, to speak with a Sydney Mortgage Broker, Gold Coast Mortgage Broker or an Australian expat mortgage broker – contact by calling us on 1300 928 227 or email info@hfinance.com.au