The RBA Decision

The RBA board have decided to hold the cash rate for another month.

Despite Australia’s low inflation rate the RBA is clearly concerned that Australia’s forecast economic growth will push inflation higher.

Whilst unemployment and inflation remain low, it is unlikely that we will be seeing a rate cut in the near future.

We will now sit and wait to see what our home loan lenders do with their interest rates. Within the mortgage industry we are hearing every lender complain about the same problem………. the rising cost of funds.

The blue chart below (in the top left corner) shows the overall change in the cost of funds for the major banks since June 2007. As you can see, the overall cost has risen by around 1.20%. This is roughly the same amount that our banks have moved their home loan rates above the cash rate.