RBA May Rates Decision

Today the RBA Board decided to lower the cash rate by 25 basis points to 1.75 per cent, effective 4 May 2016.

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Source: RBA

The RBA noted in their press release “Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”.

The RBA also cited “In reaching today’s decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate. At present, the potential risks of lower interest rates in this area are less than they were a year ago.”

Surprisingly, last weeks’s CPI Data showed that for the March-quarter CPI fell 0.2 per cent versus an expected 0.2 per cent rise, pushing the annual rate down to 1.3 per cent, which was well below the 1.7 per cent expected by economists. Core inflation — which excludes volatile items — fell to 1.6 per cent, which is also sitting comfortably below the RBA’s target range of 2-3 per cent. This led to economists predicting a rate cut today. 

 

RBA Decision

This is good news for First Home buyers looking to buy their first home now or in the near future, as the borrowing costs and repayments will be lower. However, for the first home buyers that are currently saving it makes it even harder to accumulate a deposit, as interest rates on savings accounts are likely to be reduced by the financial institutions. This confirms the growing need for a greater amount of assistance for first home buyers as the Great Australian Dream of home ownership gets harder by the day.

You can read the full RBA statement from today’s board meeting here.

To find out what savings rates the banks are offering, please see our savings comparison page.

You will be able to see which banks will pass on the rate cuts over the next few weeks by visiting  our home loan comparison page.

To compare more options and obtain a loan pre-approval, you should speak to a mortgage broker.

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