Despite the likelihood that the spot rate will be kept at 0.25% for the foreseeable future, Australian mortgage holders should remain cautious, experts say.
As expected, the Reserve Bank of Australia decided to keep the cash rate intact at its effective lower limit. Tim Lawless, head of research at CoreLogic, said that the RBA is unlikely to further lower the rate, as this would not be able to provide additional economic stimulus.
"The cash rate is not expected to increase any time soon either, the RBA clarifying through previous announcements that it does not expect an increase in the cash rate as long as labor markets will not move closer to their definition of full employment and inflation. is heading towards the target range of 2-3%, "he said.
Lawless said the chances of hitting these targets are slim over the next 12 months, making rate movement impossible.
However, there is growing evidence of a recovery in the economy, even if the basis is unprecedented.
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For example, recent market data shows that the hardest hit labor markets are gradually recovering, retail sales are starting to increase, vacancies are showing a slight increase and consumer sentiment reports are tracking levels prior to COVID.
"In fact, the RBA previously stated that it saw the Australian economy follow somewhere between the best scenario and the central scenario, highlighting the benefits of earlier than expected flattening of the virus curve and the backsliding of restrictive economic policies, "he said.
Lawless warned, however, that despite rate stability, the economy was still under pressure from downside risks.
"The main risk to economic recovery is a second wave of viruses. The recent large increase in virus cases in Victoria is a reminder of the fragility of the economy and the importance of keeping the virus under control, "he said. said.
Sarah Megginson, editor of Your Investment Property, Your Mortgage and Australian Broker, said that borrowers in particular should be wary in the coming months.
"Even if the positive sentiment returns and trade begins to intensify, there is still a big question mark over what will happen at the end of September when the initiative JobKeeper and other stimulus packages are expected to end, "she said. said.
Megginson thinks it is high time for borrowers to review their finances and make sure they are not paying too much.
"Anyone who has a three in front of their mortgage has the potential to do better. Debt is currently the cheapest it has ever been, which means there is a real opportunity to make big progress with your loans and get your finances back in shape, "she said.
Raj Ladher, a mortgage specialist at YourMortgageBroker, said that borrowers who may be looking to refinance should consider contacting a broker.
"As part of their service offering, brokers should check with their customers at least every 12 months to see how their rate compares to the market, particularly at this time," he said. .
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