Home News Why RBA is likely to keep cash rates muted next year

Why RBA is likely to keep cash rates muted next year

Font size :

The housing downturn may urge the Reserve Bank of Australia (RBA) to keep the official cash rate at its lowest level until late 2019.

Projections of a continued housing market downturn are coming from a chorus of industry analysts and experts and this could urge the Reserve Bank of Australia (RBA) to keep the official cash rate at its lowest level until late 2019.

According to a Bloomberg report, Citi was one of the latest industry watchers which noted continued price declines. In a research note, City analysts said nationwide housing prices will fall between 10% and 15% from recent peaks.

The analysts noted that while these declines would be the largest in recent times, it would just offset the overvaluation the market witnessed in recent years.

However, there is a catch -- the persistent price declines could adversely impact Australia's economic growth.

"Even assuming a continued orderly correction in the housing market, there will be a sizeable drag on economic growth from the downturn in housing construction, the expected further slowdown in housing credit growth and some spillovers to consumer spending," Citi said.

ANZ Bank had the same view. It said that after recording a strong 4% economic growth in the first half of the year, Australia seemed to have started going downhill there is no one to blame but the housing market.

The latest Stateometer by ANZ Bank is now casting doubt over the fate of Australia's economy as the earlier momentum it had achieved has started slowing down.

ANZ economists said all states and territories except Tasmania started decelerating over the September quarter.

"The loss of momentum demonstrated by the Stateometer is consistent with our forecast that the Australian economy will grow at a year-ended pace of 2.9% by the June quarter 2019, down from 3.4% in June this year," the economists said, as quoted by Business Insider Australia.

HSBC also expects home prices to continue falling, with nationwide values dropping between 3% and 8% in 2019, having declined by 2% this year.

“A cooling was expected, but the price falls have been larger than previously forecast. The cooling has been due to a reversal of factors that drove the boom in the first place," an HSBC analyst said in a research note.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

Banning commissions is the best option for brokers and borrowers, says industry figure Banning commissions is the best option for brokers and borrowers, says industry figure

A broker has written an open letter arguing that removing commissions will benefit the whole industry Read more

More Aussies to struggle with mortgage repayments: Moody's More Aussies to struggle with mortgage repayments: Moody's The ratings agency expects an increase in delinquencies over the next few months ... Read more

Will Labor’s negative gearing changes only worsen the housing downturn? Will Labor’s negative gearing changes only worsen the housing downturn? Rate cuts would cushion the impact of the changes, but prices are likely to fall further ... Read more

Borrowers turn to customer-owned banks for home loans Borrowers turn to customer-owned banks for home loans They are ditching the Big Four banks due to the controversies uncovered during the royal commission's queries ... Read more

More mortgage news and articles

Sponsored Links

Friday, Mar 22, 2019
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords