The Reserve Bank of Australia (RBA) official interest rate is expected to hold steady at 1.5% today, September 4th.
Economists’ Interest Rate Forecasts
According to the Westpac Banking Corp (ASX: WBC) weekly update, the RBA, “is certain to leave rates on hold at 1.50%.”
However, despite the RBA keeping rates on hold since August 2016 (it hasn’t raised rates since November 2010), Westpac said, “lending conditions in the housing market have tightened.”
According to National Australia Bank Ltd. (ASX: NAB), interest rates are tipped to stay on hold at 1.5% today. The bank is forecasting a 0.25% rise to 1.75% in June 2019.
Of the 25 economists polled by Bloomberg, every one of them expects rates to remain on hold.
Does it Matter?
In the last week, Westpac, Suncorp and Adelaide Bank have increased mortgage interest rates citing higher funding costs. Many of Australia’s largest banks source a big part of their loan funding from US debt markets, where interest rates have been rising.
As the RBA’s Tessa McKinnon wrote in March 2018: “The major banks obtain a larger share of funding from offshore wholesale markets compared with other Australian-owned banks.”
As we wrote here, CBA and Westpac Could Be Forced To Raise Interest Rates, the USA’s reserve bank is being tipped by some pundits to raise interest rates once every three months.
Property Prices
On Monday, CoreLogic reported the 11th consecutive month of falling Australian property prices.
“Weaker housing market conditions can be tied back to a variety of factors, foremost of which is the tighter credit environment which has slowed market activity, especially amongst investors,” CoreLogic’s Tim Lawless noted.
“Fewer active buyers has led to higher inventory levels and reduced competition in the market.”
Adding to concerns is the number of failed refinancing attempts by investors and homeowners.
Data from Digital Finance Analytics and UBS suggest a year-over-year increase in the number of defaults. “About 40 per cent of people who tried to refinance were unable to do so,” Digital Finance Analytics principal Martin North wrote in a blog. “If you go back a year it was 5 per cent.”
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