The Reserve Bank of Australia surprised nobody when it left official interest rates on hold on Tuesday at the record low of 1.5 per cent for the 13th consecutive month.
Governor Philip Lowe said he’d done that despite the fact that there is some light appearing on the economic horizon.
“Labour markets have tightened further and above-trend growth is expected in a number of advanced economies, although uncertainties remain,” he said.
The bank has an “expectation that growth in the Australian economy will gradually pick up over the coming year”, he said.
That positive note is challenged by some, with Stephen Anthony, chief economist with Industry Super Australia, telling The New Daily that there was not real evidence that things would improve soon.
“I’d say to the bank, ‘Stop pretending you do know and issuing statements based on faith’,” he said.
“Central banks are practicing faith-based economics and the quantitative easing and rate cut policies of recent years have created zombie economies.”
You can argue the toss about the RBA’s view but the ‘zombie’ economy is creating opportunities for those wanting to borrow to buy property.
Steve Mickenbecker, director with rate watch group Canstar, said there had been some declines in interest-only interest rates for property in recent times.
“I was a little surprised to see the decline in interest-only loans because they had been increasing as APRA had told the banks it wanted to see less investment and interest-only lending,” he said.
“Most of the fall has been triggered by moves by St George/Bank of Melbourne who may have responded to seeing their lending volumes fall.”
The average interest-only investment rate has fallen 0.71 per cent to 4.93 per cent with the best deal in the market sitting at 4.14 per cent.
This is welcome news for interest-only borrowers “who have stuck it out with investor interest-only loans and, on average, copped a 40-basis point rise over the last 12 months, adding $116 per month to the cost of a $350,000 mortgage”, said Sally Tindall, Money Editor at rate watch site RateCity.
Deals for those wanting principle and interest investment loans have dropped marginally to 4.73 per cent with the best deals at around 4.09 per cent, according to Canstar.
For home buyers there has been some downward movement with average rates down 0.17 per cent to 4.73 per cent while the best deals are at a low 3.65 per cent.
Mr Mickenbecker said: “I’ve had anecdotal evidence that there are some better deals for owner-occupiers being offered for new customers but not for existing customers.”
Ms Tindall said traditional home owners have good opportunities in the current environment if they’re prepared to really shop around.
“Australians opting to live in their properties and pay down their debt can nab a rate as low as 3.44 per cent.”
There are even rock bottom investment deals available.
“While there are 510 owner-occupier loans under 4 per cent, investors have just 49 to choose from,” she said.
The RBA’s decision came ahead of Wednesday’s GDP data, which is expected to show the economy is growing marginally slower than the RBA’s most recent annualised forecast of 1.75 per cent.
Dr Anthony said the economy has effectively been “set adrift” by the “economics of faith”.
“The question is when you ride a bike more and more slowly, at what point do you fall off?”