In the RBA’s last monthly statement for 2021 on Tuesday, RBA governor Dr Philip Lowe reiterated that the central bank wouldn’t increase the cash rate until actual inflation sat within 2%-3%.   The RBA statement forecast this was unlikely to happen before 2023, however Dr Lowe said he and the board were prepared to be patient. “We will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently,” he says.   At the same time, Dr Lowe applauded Australia’s strong economic recovery, including that of the labour market, following COVID’s Delta strain outbreak.   He added that he doesn’t believe the new Omicron strain will derail this recovery with the economy expected to return to its pre-Delta path in the first half of 2022. “High rates of vaccination and substantial policy support are underpinning our economic recovery,” Dr Lowe says. “Household consumption is rebounding strongly and the outlook for business investment has improved.  

What’s the current state of housing?

Another reason for the RBA holding cautious and firm on its cash rate decision is due to housing prices. While both pricing and housing credits have risen strongly in the past year – the latter by 6.7% – both are now either declining or stabilising along with housing credits, commitments and mortgage rates. According to CoreLogic’s national head of residential research, Eliza Owen, while Australian home values enjoyed a 1.3% rise in November – which was relatively high compared to the decade average of 0.4% – this growth rate had eased. She said she expects housing value growth to continue to slow into 2022. “Monthly growth rates have slowed from the recent peak of 2.8% in March 2021,” Ms Owen says. “The value of housing loan commitments has also declined in recent months, with ABS data showing a 2.5% decline in the value of new lending for the purchase of property in October.” However, this same data also revealed that the total value of new home loan commitments is still 32.2% higher than that of a year ago. Loan commitments for owner-occupier housing alone experienced a 15.1% jump in this time and a stunning 42.5% jump overall compared to pre-COVID levels in February 2020. The ABS data also revealed a 1.1% increase in new investor lending, amounting to an 89.6% increase in the past year and continuing an unbroken period of growth since October 2020. So, in short, everything’s not lost for current or potential mortgage holders.  

What does all this mean for my loan?

Firstly, don’t spend your Christmas and New Year worrying about your loan – either your current one or the one you’re planning to set up in 2022. But do take a little time out to consider these statistics and to ensure your New Year’s resolutions include a strong loan strategy. RBA’s lending rate data is positive especially when it comes to new owner-occupier loans, which have held steady with a 2.37% rate for the three months to October after a consistent decline since mid-2019. New owner-occupiers are also increasingly turning to fixed rate mortgage products, which jumped to a 2% rate in October after a recent low of 1.95% in May. So, for newbies, the festive season is a great time to talk with us about what RBA’s cash rate target means for you and your mortgage lending. If you already hold a mortgage, you may want to consider a fixed rate or even a “split” loan, wherein you can decide which part is fixed and which part is variable. But bear in mind that some lenders have already increased their interest rates to ward off potential RBA cash rate increases. Either way, we’re always happy to help you sift through your lender and mortgage possibilities so in between your gift wrapping and cooking, why not give us a call?