Interest rates kept on hold again

Some mortgage holders may be breathing a sigh of relief. Others may now have to wait a little bit longer before they can buy that dress that want.

Whether you were expecting an interest rate rise or a cut this month, there was lots of speculation to support both possibilities. The booming mining sector and the strong Aussie dollar indicated rates could rise. But the struggling manufacturing sector and the volatile sharemarket could have seen rates dip.

However, the Reserve Bank of Australia (RBA) has kept the cash rate at 4.75 per cent, where it’s been since November 2010. Governor Glenn Stevens acknowledged that the economy is going through quite a confusing period.

“Conditions in global financial markets have been very unsettled over recent weeks, as participants have confronted uncertainty about both the resolution of sovereign debt problems and the prospects for economic growth in Europe and the United States,” Stevens says.

“Some temporary impediments that had contributed to a slowing in growth in some countries over recent months, such as the supply-chain disruptions from the Japanese earthquake and the dampening effects of rising commodity prices are lessening. But the uncertainty and financial volatility is reducing confidence and may result in more cautious behaviour by firms and households in major countries. A number of forecasters have scaled back their global growth estimates over the past couple of months.”

Mortgage Choice spokesperson Kristy Sheppard says the RBA’s decision is positive news for investors.

“I think sanity has prevailed, that’s for sure,” she says.

“The RBA knows times are challenging for many consumers, so the bank has reacted. The longer interest rates remain stable, the more positive flow-through there is, and that flows onto the housing market. Owners will see more return to growth and buyers don’t have the shadow of repayment increases, so there’s a positive there as well.”

However, she adds an interest rate cut is “quite unlikely” down the track, due to the continuing mid-term pressures of inflation and the mining boom.

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