06 April 2014 RBA rate announcement

The Reserve Bank of Australia (RBA) has announced the outcome of its monthly board meeting.

At 2:30pm today the RBA revealed it will leave the official cash rate on hold at 2.5 per cent. April will mark the seventh consecutive meeting where the board has kept rates steady at 2.5 per cent, with the last rate drop occurring in August 2013 and no meeting occurring in January 2014.

LJ Hooker deputy chairman L Janusz Hooker said the RBA’s decision to leave rates on hold is good news for the property market.

“From all indications, we are anticipating a very busy Easter and a strong market heading into winter,” he said.

Mr Hooker said the RBA had successfully used interest rates to boost housing in the aftermath of a peak in mining investment, but that house price growth should begin to stabilise later this year.

“It is still a seller's market in Sydney… The lack of stock and healthy competition means we should continue to see a stronger winter market, but I think the rate of price growth has peaked.”

Mr Hooker said buyers know rates are likely to rise sometime in the next year and are already factoring this into their budgets.

Despite Mr Hooker’s confidence that buyers are prepared for the cash rate to start rising again, finder.com.au issued a warning earlier this week urging investors to start preparing for higher costs.

A finder.com.au survey of Australia’s leading economists and banking experts found that five of the 11 respondents believe the cash rate will rise during the fourth quarter of 2014.

The five experts from Commonwealth Bank, CommSec, HSBC, ING DIRECT and St George Bank told finder.com.au that the RBA is tipped to increase the cash rate on Melbourne Cup Day at its November board meeting, or by the end of the year.

Finder.com.au’s Michelle Hutchison said now is the time to plan ahead before interest rates start to rise.

“If the official cash rate does increase by the end of the year, it’s likely that we will see home loan interest rates start creeping up before then," she said.

“So if you’re an existing borrower, it’s a good idea to review your budget and factor in higher costs now, before interest rates rise.”

Ms Hutchison said for every 0.25 percentage point increase an extra $50 would be added to the monthly repayments on a $300,000 loan, based on finder.com.au’s average variable rate of 5.37 per cent.