Last week, the Reserve Bank of Australia made its final cash rate announcement for 2014, and its decision to leave rates on hold came as no real surprise.
This is the 16th consecutive month that the official cash rate has been left on hold and it now seems all but certain that rates will continue to stay on hold for some time yet.
But, before we start looking towards the future, let’s take a look back at the year that was and some of the reasons why the official cash rate has been left on hold for so long.
According to the Reserve Bank of Australia, high unemployment figures and sluggish consumer sentiment provided the Board with no impetus to change the current monetary policy setting.
Furthermore, inflation is currently sitting perfectly within the RBA’s target band range of 2 to 3 per cent, giving them even less reason to move the official cash rate.
Moving forward, analysts expect inflation will continue to stay within the Reserve Bank’s target band range, while consumer sentiment and business confidence should hopefully improve gradually over the coming months.
With this in mind, it is now likely that the official cash rate will stay on hold for some time yet.
So what does this mean for home owners and potential home buyers?
The reality is, the official cash rate (OCR) plays a very important role in the property market and can have a significant impact on the decisions of potential home buyers and home owners.
Well, first and foremost the OCR has a direct impact on your loan as it significantly influences how Australia’s lenders price their home loans.
So, when the Reserve Bank leaves the cash rate on hold, it encourages lenders to leave their home loan interest rates untouched.
With the Reserve Bank now not set to meet again until February next year, if you’re looking to jump into the property game, now’s a great time to seek guidance from a mortgage broker.
Alternatively, if you’ve got a mortgage, you may want to consider reviewing your current home loan situation to see whether or not there is something in the market that’s more suited to your current needs.
If you’re looking for home loan guidance, it’s always best to speak to a professional. Not only can a mortgage broker help you find the right home loan for your needs, but they won’t charge you a thing for the privilege.
*The information provided in this article is intended for an Australian audience. It should not be relied upon for the purposes of entering into any legal or financial commitments.