It was good news for mortgage holders and home buyers last week as the Reserve Bank of Australia elected to keep interest rates on hold at 4.75 per cent for the seventh consecutive meeting – the longest period over which rates have been kept steady in four years.
The decision saw the Reserve Bank renege slightly on the growth expectations for the Australian economy that it has purported in previous months, with Governor Glenn Stevens noting in his post-announcement statement that "growth through 2011 is now unlikely to be as strong as earlier forecast" and that the resumption of coal production after the Queensland floods is proceeding at a slower rate than what was previously thought.
The Bank also referred to inflation levels in its statement, which it expects to remain elevated in the near term, but close to target over the next 12 months with a gradual increase anticipated over time.
As always, the RBA will continue to monitor inflation levels carefully, and the release of the June quarter consumer price index figures by the Australian Bureau of Statistics (on July 27) could be an important determining factor when the Board meets to set rates for August.
In his response to this decision, Century 21 Chairman and Owner, Charles Tarbey, said that it was "appropriate for current economic conditions, especially those we are seeing in relation to consumer spending and housing."
"This decision provides a boost for the residential property market and will come as much-needed relief for many mortgage holders across Australia, a large number of whom are already facing pressures to keep up with their monthly repayments."
He went on to caution borrowers to "prepare themselves for the possibility of a rate rise in August, as by then the Reserve Bank will have seen the latest inflation data which will serve as an important guide for its decision."
So where does this leave homeowners? While spared at least another month of interest rates going up, the next few months will be telling as the RBA monitors economic growth and levels of inflation. August could be the month for a rate rise if we see a significant increase in inflation figures, and borrowers should be prepared for this.
But in the meantime, homebuyers are able to enjoy another month of rates at 4.75 per cent, with mortgage repayments remaining at current levels.