Is the Reserve Bank’s official cash rate on the chopping block tomorrow?
Monday 02 May 2016
There’s been much speculation in the lead up to tomorrow’s official cash rate announcement from the Reserve Bank of Australia, with market conditions amenable to an RBA cut, but expert opinion leaning toward no change.
The official cash rate has been steady at 2% since May last year, and while many experts are expecting the same again this month, others might argue that volatile market conditions in the beginning of 2016, spurred on by uncertainty regarding China’s economy and the precariousness of Australia's domestic property market may be cause for the RBA to drop the cash rate to a record low.
In fact, the Daily Telegraph reported that after last week's consumer price index showed deflations in the Australian economy, financial markets were betting on a 50/50 chance of an interest rate cut.
However, the article went on to say that academics thought it unlikely that the Reserve Bank would upstage the Federal Budget Announcement, scheduled for 7.30 pm the same day. A Fairfax survey found a panel of 10 economists also unanimously agreed that the cash rate would stay the same tomorrow, smh.com.au reported.
Predictions for the rest of the year are less certain. Although it’s agreed by experts that there is unlikely to be a rate hike in the near future, the chances of a cut to 1.75% at some point in the coming months seems to be a popular bet.
Without a change to the official cash rate this month, it’s likely banks will maintain their current interest rates as well, which may not be welcome news for those with a home loan, or those looking for one. Currently, the average home loan interest rate is 4.73%, with a big four average of 5.03%.
To help homebuyers secure the most affordable mortgage on the market, here are the top deals from the Mozo database:
| Product | Variable rate | Min loan amount | Max LVR |
|---|---|---|---|
| Reduce Home Loans Rate Buster Offset Fee Free Variable | 3.85% | $50,000 | 70% |
| Homestar Basic Refinance Loan | 3.86% | $50,000 | 70% |
| Loans.com.au Move Fast Special | 3.88% | $50,000 | 80% |
| Australian Unity Kick Starter Home Loan | 3.96% | $200,000 | 80% |
| Bank Australia Basic Home Loan Full Salary Credit | 3.98% | $10,000 | 95% |
| Click Loans The Online Home Loan | 3.98% | $150,000 | 70% |
| Freedomlend Variable Home Loan | 3.98% | $150,000 | 80% |
| Gateway Credit Union Variable Rate Home Loan (Premium Package) | 3.98% | $150,000 | 80% |
In the event that there is a rate cut following tomorrow's RBA announcement, Mozo’s rate chasers will be keeping a close eye on the market and reporting whether banks have been naughty or nice in passing on cuts. Watch this space for updates!