What does the RBA have in store for February - and the rest of 2018?

Kelly Emmerton   |   30 Jan 2018

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The Reserve Bank board is set to have its first meeting of 2018 next week and although there have been predictions of a rate rise this year, Mozo’s Peter Marshall has said a change in February is unlikely.

The RBA has been sitting on its hands for a while now, with no changes to the official cash rate since August 2016.

Official rate rises have been even rarer in Australia - in fact, the last one was seven years ago, in November 2010. But according to Marshall, the low rate environment can’t last forever, and 2018 might just be the year that breaks the downward trend of Australia’s official cash rate.

“The RBA have already said they consider the ‘new normal’ cash rate to be 3.50%, which is quite a bit higher than the 1.50% we’re sitting on now. So they’ve already signalled a desire to start pushing the cash rate higher in the future,” said Marshall.

RELATED: Best home loans for January 2018: Mozo Editor’s picks

Despite that, conditions will have to be right before the Reserve Bank makes a move. Key economic indicators such as wages, employment numbers, inflation and consumer confidence levels need to start moving in the right direction to make a rate rise possible in 2018.

All this takes time, which means a February rate change is more or less off the table this year.

“I’d say there’s a growing argument for a Reserve Bank rate rise later in 2018, or maybe even two, but for February, it would be a surprise to see a change. The RBA are likely to stick to their policy of cautious slow movement this year, which means it’s too early for them to make any move at this stage of the game,” said Marshall.

One factor that might still temper the RBA’s desire to start nudging rates up is the high level of household debt Aussies are facing. With close to 30% or more than 921,000 Aussies households under mortgage stress, according to a recent report from Digital Finance Analytics, pushing interest rates higher still is not a move the Reserve Bank will make lightly.

“The banks don’t have to raise home loan rates when the RBA raises the cash rate, but there’s every chance they will. The RBA are aware of this, and will be very careful about adding any more pressure to already struggling households,” Marshall explained.

If your home loan repayments are stretching the family budget thin, you might want to consider refinancing your home loan to find a better deal. To get you started, check out some refinancing loans in the table below.

Refinance home loan comparisons on Mozo - rates updated daily

  • Hot Deal Bonus $1,000 into a USaver account

    UHomeLoan - Discount Offer

    Owner Occupier, Principal & Interest

    3.59% p.a.

    3.59% p.a.

    Get $1,000 cash into a USaver account on a UHomeloan over $200k. (T&Cs apply).

    • $0.00

    • $0.00

    • yes - free

    • yes

    • no

    • 3.59% p.a.

    • 3.59% p.a.

    • $0

    • 80.00%

    • $200,000

    • $699,999

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Details Close

  • The Online Home Loan

    LVR<70%, Owner Occupier

    3.64% p.a.

    3.64% p.a.

    An easy online application with upfront rates tailored to you & no ongoing fees

    • $0.00

    • $250.00

    • yes - free up to $10,000 p.a.

    • yes - free

    • yes - optional, $198 annual fee

    • 3.64% p.a.

    • 3.64% p.a.

    • $363

    • 70.00%

    • $150,000

    • $2,000,000

    • Variable

    • Principal & Interest, Interest Only

    • Owner Occupier

    • Fortnightly, Monthly

    Details Close

  • Basic Home Loan Special

    LVR<80%, Owner Occupier

    3.65% p.a.

    3.66% p.a.

    A Basic Home Loan which offers a competitive interest rate and other features to make your home or investment loan more affordable. No establishment fee until 30/09/2018. Option to fix full loan or split between fixed and variable. Redraw available.

    • $0.00

    • $250.00

    • yes - free

    • yes - free

    • no

    • 3.65% p.a.

    • 3.66% p.a.

    • $0

    • 80.00%

    • $10,000

    • -

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Details Close

  • Flexible Home Loan

    Owner Occupier, LVR<80%, Principal & Interest

    3.69% p.a.

    4.11% p.a.

    A flexible Home Loan with Member Package for Owner Occupiers including a low rate, redraw and offset. Annual fee $395. Experts Choice - Australia's Best Bank 2018.

    • $395.00 yearly

    • $300.00

    • yes - free

    • yes - free

    • yes

    • 3.69% p.a.

    • 4.11% p.a.

    • $0

    • 80.00%

    • $400,000

    • $699,999

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Details Close

*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

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