The Reserve Bank of Australia (RBA) has kept the official cash rate at its record low 0.25 per cent in its monthly board meeting.
It comes ahead of Wednesday’s national accounts figures for the June quarter, with economists predicting a 6 per cent contraction in Gross Domestic Product (GDP). That would mark the largest contraction since the Australian Bureau of Statistics began measuring in the 1950s, and reflect the beginning of the first recession in nearly three decades.
The RBA first cut interest rates to their record low in March, with governor Philip Lowe saying the bank is unlikely to take rates any lower.
"Relatively speaking, the economic fallout of the coronavirus that is reverberating around global markets has not impacted Australia as hard as many other nations. Even considering Victoria’s second wave and the potential for subsequent outbreaks elsewhere, employment figures are encouraging and other key indicators point to our economy’s overall resilience,” Laing+Simmons’ managing director Leanne Pilkington said in the Finder RBA interest rate survey.
“Low, steady interest rates for the foreseeable future are appropriate to support the recovery."
All 40 of the panellists on Finder’s survey predicted the hold verdict, although 57 per cent believe that banks will still move to increase their variable interest rates as loan deferrals see banking profits dip.
“This may send banks scrambling to recoup lost funds by pushing up home loan rates to absorb some of these costs, which will come at a detriment to mortgage customers,” Finder insights manager Graham Cooke said.
“A flat cash rate does not mean homeowners are in the clear. We learned this during the most recent period of cash rate stagnation. While the rate held at 1.25 per cent for 34 months starting in 2016, banks increased their variable rates seven times.”
Cooke said 0.25 per cent increase to the average variable rate of 4.06 per cent would set homeowners back another $58 a month, or $20,993 over 30 years.
September will be a critical month for the Australian property market, with home loan supports set to wane for many home owners. CoreLogic on Tuesday warned this could force sellers’ hands and trigger a wave of distressed properties onto the market, while Canstar finance expert Steve Mickenbecker also sounded the alarm.
“With JobKeeper and JobSeeker winding back from September and many mortgage holders nearing the end of repayment pauses with their banks, September will be a testing time,” Mickenbeceker said.
“Now is the time to safeguard yourself by picking up new money savings habits, and making a decision to renegotiate your loan or refinance to a lower cost option.”
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