RATES ON HOLD

Written on the 7 June 2011

RATES ON HOLD

THE Reserve Bank of Australia (RBA) has opted to delay a rates rise today, citing volatile European markets, softened commodity prices and modest credit growth.

The cash rate remains unchanged at 4.75 per cent, welcome news for Australian homeowners who on the ground level haven’t felt a positive shift in market conditions.

RBA governor Glenn Stevens says ‘the board judged that the current mildly restrictive stance of monetary policy remained appropriate’.

“Overall credit growth remains quite modest. Signs have continued to emerge of some greater willingness to lend, and business credit has expanded this year after a period of contraction. Growth in credit to households, on the other hand, has softened, as have housing prices,” he says.

“CPI inflation has risen over the past year, reflecting the effects of extreme weather and rises in utilities prices, with lower prices for traded goods providing some offset. The weather-affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring.”

Stevens also says GDP experienced a ‘sharp fall’ in the March quarter due to the natural disasters, while the Japan Earthquake/tsunami was the only setback in strong growth in the Asian region.

Suncorp Bank executive general manager David Marshall warns homeowners should factor in a rates rise as soon as next quarter.

“While homeowners may be given a short-term reprieve in June, we do encourage them to start factoring impending rises into their budgets,” he says.

“It’s always good to be on the front foot and be prepared, so when fluctuations do occur they’re not as difficult to manage.

“A smart option for existing mortgage holders would be to start putting extra money toward their home loan now to create a buffer against future rate rises and pay off loans sooner.”


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