Cash rate holds again as borrower seek to lock in fixed interest rates

by Mike Wood07 Sep 2021

The Reserve Bank of Australia has again resisted changing the cash rate, keeping it at 0.1% for another month.

The central bank continues to hold its nerve on the price of money, despite many within the industry raising their rates, causing borrowers to pivot towards fixed rate loans.

Australian Broker reported last week that fixed rates loans have jumped from lower than 20% of the market to above 40% in recent ABS stats, a clear indication that the public are seeing that rates will rise sooner than expected.

That said, the cash rate hold was no surprise, with many citing the ongoing lockdowns as a reason to keep borrowing costs low.

“I expect we will be seeing some light at the end of the tunnel with greater access to vaccines and the strong boost in take up numbers in certain states,” said John Kolenda, managing director at Finsure.

“Once lockdowns are eased, we should see a strong recovery in certain sectors and I anticipate a very strong Christmas period for states that open up.”

“The real estate industry, in particular, will see a strong rebound once lockdowns ease with many more listings hitting the market and a surge of interest from buyers starved of choice.

“But some industries such as tourism and hospitality will take longer to bounce back, while unfortunately some businesses may not recover.”

“Rates should remain on hold for the next two quarters until we see how the economy is performing in the first half of next year.”

“Uncertainty, however, remains around how the recovery will play out nationally as not all states are on the same page as to what vaccination numbers they are hoping to achieve and when will they open borders.

“This does hamper the national recovery, which is likely to produce varying economic numbers and growth.”

 

READ MORE: ABS stats lay bare how fixed rate mortgages are taking over