October 05, 2021

The Reserve Bank of Australia (RBA) has decided it will keep the nation's official cash rate on hold at 0.10%.

Speaking about the decision, CEO of Mortgage Choice and Smartline, Susan Mitchell said, "the latest decision from the RBA comes as no surprise. The bank has signalled it will keep the cash rate at its record low for the foreseeable future."

"We continue to see borrowers locking in low fixed rates. Mortgage Choice monthly approval data showed that in September over 42% of home loans had a fixed component. We have seen a strong trend towards fixed interest rates over the last two years but this is the strongest demand we've seen for this product type since we began recording borrower preference."

Ms Mitchell says the latest housing market data suggests that the nation's property market will be relatively unharmed by the Delta induced lockdowns.

"The latest lending indicators data from the Australian Bureau of Statistics revealed that while there was a fall in the value of new loan commitments for owner occupiers in August, the value remains 34% higher compared to a year ago. As we see New South Wales come out of its current lockdown, we may see a surge in activity in the state's already strong property market.

"The current property boom, strong growth in housing credit and household debt has caught the attention of the Council of Financial Regulators, which is likely to result in macroprudential measures being introduced in the coming months to take some heat out of the housing market," said Ms Mitchell.

Realstate.com.au economist Paul Ryan said, "the introduction of macroprudential policy seems like a foregone conclusion. They're likely to go after high-debt borrowers but I would guess that they're going to tweak serviceability buffers as well. Some borrowers who are ticking over six times their income won't be able to get a loan as large as they currently can. I would expect there'll be some rationing of those high debt-to-income (dti) loans. The rationing of high dti loans will affect those people who are going for those loans, which tend to be lower income earners, first-home buyers and some investors."

"While we won't be seeing any major changes to the official cash rate for some time, lenders continue to offer extremely competitive variable and fixed interest rates. Borrowers may still be able to access interest rates under 2% per annum, which means it's a great opportunity for borrowers to speak to their local mortgage broker about getting a better deal," concluded Ms Mitchell.

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