The RBA cash rate announcements on Tuesday 1st March, used to be the most important barometer when it comes to home owners and investors trying to make a call where their mortgage rates were heading….. but is this now an accurate benchmark?
You see, the reason why most now dont really care is that the majority of lenders are making their own rate policy decisions countercyclically….. despite what the RBA does, in order to protect and grow the Australian economy. So it begs a very obvious question, why do we care what the RBA decides as owners of Australian real estate?
Recently we have seen NAB lifting its rates by 0.15 of a percentage point for property investors who are paying off principal, as well as interest. The move comes as NAB introduces a new mortgage pricing structure, having its home loan products in four distinct categories.
Well the truth is the RBA are still extremely instrumental in setting the tone about the overall state of the economy. They are a body of economists all working to use as much current and futures data as possible, to try and stay ahead of any potential harmful trends that may cause a potentially catastrophic imbalance of Australia’s economic climate.
As most investors recall, it was the end of 2014 when the APRA reforms took place, which was designed to avoid the housing markets continual uphill tradjectory…. as well as having a desire to stymie investors who continue to borrow above their perceived “safe levels”. As you can see below, it certainly did its job with current investor lending dropping down to below 8% of annual growth for that sector of lending.
Although we continue to see high amounts of investor activity in most parts of Australia (especially Brisbane and Melbourne), I think it is getting to the point where some of the restrictions in lending needs to be re-addressed to bring it back to a healthy level.