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May RBA decision: Cash rate held for record 19th meeting in a row

The Reserve Bank of Australia (RBA) has left the cash rate on hold again at 1.50%.

RBA

What’s the May 2018 RBA Cash Rate?

In its fourth meeting of the year, the RBA board agreed to leave the cash rate on hold at 1.50%.

This marks the nineteenth meeting in a row the RBA has held rates steady, with the last rate movement taking place in August 2016 with a 25 basis point cut.

Experts correctly predicted today’s decision, with all 23 economists surveyed by Bloomberg forecasting the cash rate would remain on hold in May.

RBA admits employment growth has “slowed”

In his statement, RBA Governor Dr Philip Lowe remained optimistic regarding the economic outlook, despite noting that employment growth has “slowed”.

“The Bank’s central forecast for the Australian economy remains for growth to pick up, to average a bit above 3% in 2018 and 2019,” Dr Lowe said.

“Employment has grown strongly over the past year, although growth has slowed over recent months.”

Canstar’s Group Executive for Financial Services Steve Mickenbecker said the RBA will want to see wages growth before it increases the cash rate to “give borrowers margin to meet higher repayments”.

Rate action possible in May despite RBA hold

Mr Mickenbecker said that despite the RBA’s decision to hold the cash rate, lenders may still make rate movements this month.

“With APRA’s plan to remove the 10% growth cap on investment lending, the banks will be under pressure to hand back some of the increases passed through to investors last year,” he said.

The Australian Prudential and Regulation Authority (APRA) announced last week it will remove its 10% annual cap on investor loan growth and replace it with more permanent measures to strengthen lending standards.

Lenders moved on rates over April

Despite record low interest rates and the steady cash rate throughout April, several lenders on Canstar’s database decreased rates even further over the month.

Of the lenders that adjusted rates, 70% had decreased.

The biggest cuts were seen for investor loans, both variable and fixed, while fixed loans were the main focus of rate cuts fowner-occupiersers.

Residential home loan rate movements

Owner Occupier Principal & Interest – Home Loan Market Snapshot – April 2018
  Basic Variable Standard Variable 1 Year Fixed 2 Year Fixed 3 Year Fixed 4 Year Fixed 5 Year Fixed
Decreases 2 2 6 4 7 3 6
Increases 1 3 0 0 1 0 0
Avg. Decrease -0.07% -0.11% -0.14% -0.14% -0.17% -0.38% -0.18%
Avg. Increase 0.10% 0.18% 0.00% 0.00% 0.21% 0.00% 0.00%
Source: www.canstar.com.au. Includes all eligible owner occupier and investment home loans in Canstar’s Home Loans database, available as of 1/04/2018 to 30/04/2018. Interest rates based on a loan amount of $400,000, 80% LVR, and principal and interest repayments. Based on new to bank interest rates including specials. Excludes honeymoon or intro rate home loans.

Investment home loan rate movements

Investment Principal & Interest – Home Loan Market Snapshot – April 2018
  Basic Variable Standard Variable 1 Year Fixed 2 Year Fixed 3 Year Fixed 4 Year Fixed 5 Year Fixed
Decreases 1 7 4 7 9 1 3
Increases 1 1 0 0 0 0 0
Avg. Decrease -0.10% -0.23% -0.20% -0.20% -0.18% -0.10% -0.27%
Avg. Increase 0.10% 0.15% 0.00% 0.00% 0.00% 0.00% 0.00%
Source: www.canstar.com.au. Includes all eligible owner occupier and investment home loans in Canstar’s Home Loans database, available as of 1/04/2018 to 30/04/2018. Interest rates based on a loan amount of $400,000, 80% LVR, and principal and interest repayments. Based on new to bank interest rates including specials. Excludes honeymoon or intro rate home loans.
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