The Reserve Bank of Australia (RBA) has left the cash rate on hold ahead of the 2018-19 Federal Budget which will be handed down next week in Canberra.
Disclaimer: Comments made in this article are either general in nature or quoted from the RBA press release. You should not solely rely on the information of this blog. You should consider seeking expert financial and/or credit advice before making any investment or house acquisition decisions. For first home buyer ‘credit advice’ click here.
— FHBA (@fhba_com_au) May 1, 2018
RBA Governor Philip Lowe press release on the RBA board’s May cash rate decision was quite similar to the April statement, although it did make reference to the increase in the price of oil (which we are all beginning to notice when we go to fill up our cars!). While the RBA is making predictions for stronger economic and employment conditions, until these forecasts eventuate (or should we say, if these forecasts eventuate?) the RBA seems to be quite comfortable with the current cash rate setting of 1.50%.
Below are the key takeouts of the May media statement.
Key RBA Takeout’s: The Australian Economy
- The RBA expects Australian economic growth to pick up and average a bit above 3% in 2018 and 2019.
- Business conditions are positive and higher levels of public infrastructure spending is also supporting the economy.
- Household incomes are only growing slowly at a time when household debt levels are high.
- While employment growth has been strong over the last year, the rate of growth has slowed in recent months.
- Employment has increased in all states.
- As the labour force participation rate has increased, the unemployment rate has been steady in recent months (around 5.5%).
- Wage growth continues to be low.
- There are some reports that some employers are finding it more difficult to hire works with the necessary skills.
RBA on Inflation
- Inflation remains low, at just below 2%.
- However, a gradual pick-up in inflation is expected as the economy strengthens – at a bit over 2% in 2018.
RBA on the Property Market
- The RBA continues to note that the Sydney and Melbourne property markets have slowed.
- The RBA also continues to be happy with APRA’s tighter credit standards..
What will the RBA likely do with the cash rate for the remainder for 2018?
Currently, the market is saying that no rate changes are on the cards just yet (despite the record run of being on hold). Overall, the majority of experts, economic indicators and even betting markets are indicating that the next change will be an increase (rather than a decrease). The ‘big 4’ banks currently have these predictions for the RBA cash rate in 2018:
- ANZ, CBA, NAB – one 0.25% rate increase late in 2018
- Westpac – no rate changes in 2018
ANZ, CBA and NAB think rates will increase slightly in late 2018
I’m about to start looking for my first home. What should I do?
A great place to start is to speak with a qualified Mortgage Broker whom specialises in first home buyers. A competent Mortgage Broker can determine your borrowing capacity, assist you compare home loan options, help you get a home loan pre-approval, guide you through the whole finance process and of course, answer any jargon you don’t understand.
At First Home Buyers Australia (FHBA) we have linked up with Mortgage Australia Group (MAG) to provide the best mortgage broking service for first home buyers in Australia – FHBA Mortgages, powered by MAG. Why not start with a complimentary consultation with an FHBA Broker? Click here to find out more!
I’m still saving for a home deposit – does the RBA’s announcement effect me?
Unfortunately, the rate of interest on savings accounts continues to be relatively low at the moment. But when saving for a home deposit, as cliche as it may sound, every bit really does count. Here are some hot tips:
- Hot tip 1: Look at your expenses and consider whether you can cut back on any of your lifestyle expenses. A good place to start is our free Budget Planner.
- Hot tip 2: When was the last time you looked at how much interest your savings is earning? When you have a spare moment, take the time to check your rate of interest and compare this to other savings accounts and term deposits around the net. Some of Australia’s leading comparison sites include Mozo, Canstar, Finder and RateCity.
- Hot tip 3: The First Home Super Saver (FHSS) became law in December. Read up on how it works and consider whether this could be something that will help you save your home deposit quicker. How the FHSS works.
I have some money saved, but I’m not sure if it is enough?
Working out how much you need can be tricky. Have you tried our FHBA Deposit Estimator? It gives you a quick snapshot of how your savings are going versus an estimate of how much more you might need to save in order to have the complete deposit. And it’s free! Try it now!
I want to know more about the RBA decision
Interested in reading the full RBA statement from the May 2018 board meeting? You can access the RBA media press release here.
When is the next RBA board meeting?
The next RBA board meeting will be held on Tuesday the 5th of June. It will be the first RBA board meeting following the 2018-19 Federal Budget.
First Home Buyers Australia
Did you know?
Did you know that you can protect yourself from a rate rise as a mortgage borrower? A fixed rate home loan allows you to lock in an interest rate for a period of time, such as 1 year – 7 years. This gives borrowers certainty around home loan repayments. Fixed rates have been rising in popularity over the last few months. But how do you choose whether to get a fixed rate home loan or go with the more common variable rate home loan option? Click here to learn more about your first home loan options.