RBA kicks off 2019 with February interest rate hold

The Reserve Bank Board has maintained the official cash rate at 1.50% for a 30th consecutive month at its first meeting of 2019 in Sydney this afternoon.

While the decision ensured rates remain on hold until at least March, the RBA Governor, Philip Lowe, did express concern about a number of economic indicators in his monthly post-meeting statement.

“The outlook for global growth remains reasonable, although downside risks have increased. The trade tensions are affecting global trade and some investment decisions,” he said. 

“The Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time."

RELATED: ING latest lender to hike variable home loan rates

And according to Mozo Data Product Data Manager, Peter Marshall, below target inflation figures, falling business confidence and continued pressure from a declining housing market could force the RBA’s hand when it comes to pulling the trigger on a future rate cut.

“Lower than expected CPI and falling house prices both give the RBA plenty of scope to consider cutting rates without hurting the economy, so I very strongly believe that there will be a cut in the first half of the year,” said Marshall.

“Because the RBA’s been saying for so long that they expect the next rate move to be up they won’t want to rush it or create any undue sense of panic, but if they’re able to adjust  expectations first then a cut in March or April isn’t out of the question.”

What lies ahead for interest rates and home loan rates in 2019?

This time last year the Reserve Bank was clear in its desire to raise the official cash rate from its current historic low level of 1.50%, but fast forward a year and a very different picture has emerged.

A number of key economic indicators, including those mentioned above, are not tracking in the direction they once were, which is why Marshall sees a cut to the official cash rate as a real possibility.

“Economic growth has consistently undershot the expectations of the RBA, so while there are lots of indicators in the economy that say things aren’t too bad, there are other indicators that say that things are getting worse relatively quickly.”

One of the factors also likely putting pressure on the Reserve Bank is the host of out of cycle rate rises we’ve seen recently - particularly since June 2018.

Even since the start of 2019 the Mozo database has recorded a number of rate hikes from lenders, including the likes of big bank NAB as well as ING and ME who both lifted variable home loan rates late last week.  

Low variable rate home loans offers*

RateLenderLoan
3.44% (comparison rate: 3.51%**)Reduce Home LoansRate Lovers Variable Home Loan
3.49% (comparison rate: 3.53%**)East StreetStandard Variable
3.49% (comparison rate: 3.53%**)Well Home LoansWell Balanced
3.54% (comparison rate: 3.54%**)FreedomlendVariable Home Loan
3.54% (comparison rate: 3.59%**)HomestarVariable Rate Loan

And with renewed funding pressure from a rising Bank Bill Swap Rate, the fallout from yesterday’s Banking Royal Commission Final Report and falling home prices to contend with, Marshall only sees mortgage rates moving in one direction.

“Bank funding costs were elevated for the third quarter of 2018 which prompted half the lenders in Mozo’s database to increase interest rates. That did ease off for a little while, but the key bank bill swap rate has jumped again so funding cost pressure is back and even stronger than it was before,” said Marshall.

“Add in the fallout from the Royal Commission which could result in a rash of compensation, as well as the falling number of people taking out loans, and the banks will be looking to improve their interest margins wherever they can. That’s why there’s pressure on them to increase their loan rates.”

RELATED: What the Banking Royal Commission will mean for your home loan

Time to review home loan offers yourself? Check out some of the lowest variable rate deals in the Mozo database in the table above, or head over to the Mozo home loan comparison tables for even more great offers.

*Rates accurate as of February 5, 2019.

**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.

Read last month's Reserve Bank interest rates update.

Home loan comparisons on Mozo

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Last updated 20 June 2024 Important disclosures and comparison rate warning*
  • Unloan Variable

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    6.39 % p.a.
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    $3,043
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    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

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* 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.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.