Reserve Bank of Australia Holds Cash Rate in Red Hot Housing Market

The Reserve Bank of Australia (RBA) said it would continue to “carefully” monitor housing borrowing trends after announcing that it would keep cash rates at its current record of 0.1%.

After the bank’s monthly meeting, RBA Governor Philip Lowe said Australia’s economic recovery was much stronger than initially expected.

However, despite the housing market experiencing the fastest price increases in 32 years, Rowe reiterated that banks will not raise interest rates until sustainable inflation reaches 2-3%. ..

“The housing market is getting stronger and prices are rising in most markets.” Rowe said.. “Home credit growth in homeowners is recovering and there is strong demand from the first homebuyers.”

“Given the rising house prices and the environment of low interest rates, it is important for us to closely monitor housing borrowing trends and maintain lending standards.”

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Philip Lowe, RBA President of the Standing Committee on Economics of the Houses of Parliament, held in Canberra, Australia on February 5, 2021. (Sam Mooy / Getty Images)

Gareth Aird, head of the Commonwealth Bank’s Australian economic sector, said: Australian person He believes that the use of the word “carefully” is likely to indicate a perception that market growth levels have exceeded their expectations.

Both the RBA and the Australian Prudential Regulation Authority (APRA), the industry regulator, have repeatedly emphasized that they do not cover home prices.

APRA Chairman Wayne Byers said their responsibility was not to control home prices, but to monitor and prevent deterioration in lending standards.

“Household debt levels are undeniably high … the serviceability of that debt is also supported by historically low interest rates,” Bryce said. Said With a speech. “But at the grand level, [current] Loan statistics do not show the main signs of returning to higher risk loans. “

Many economists do not believe that the current situation encourages central banks and other authorities to intervene and intervene.

Mr Ead said the introduction of macroprudential regulation this year is unlikely, as banks’ credit growth and overall lending standards remain sound.

“People are willing to pay more for their homes as interest rates have fallen to record lows, not why RBAs and APRAs intervene to cool the market,” he said.

HSBC Chief Economist Paul Brocksham said early intervention could risk banks failing to meet their inflation target.

“RBA expects to remain relaxed about the housing boom for now,” Bloxham said. Said Australian Financial Review. “A key lesson from the 2018 housing market revision is that home prices need to rise to gain enough momentum for consumer spending, and as a result, we need to support rising inflation. did.”

“In short, RBAs need to raise house prices to meet their inflationary obligations.”

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On Friday, March 1, 2019, you will see a real estate billboard next to Canberra’s house. (AAP Image / Lukas Coch)

However, while there are concerns that unlimited rises in home prices will keep first home buyers out of the housing market, some experts say that first home buyers will be most affected if regulations are imposed in the form of lending restrictions. Is called.

“It’s no exaggeration to say that first-home buyers are usually unbalanced under the influence of macroprudential rules because they tend to have less deposits and more loans than their income,” said the Grattan Institute. Brendan Coates, director, said. Said domain.

“These tools aren’t cost-effective, and that’s why APRA is hesitant to use them unless you’re worried about financial stability,” he said.

Borrowing costs are at record lows, but are gradually offset by soaring home prices. First-home buyers are looking for more affordable homes in the suburbs and suburbs of the region.

Some experts, such as Warren Hogan, chief economist at Judo Bank, and Adrian Kelly, president of the Australian Real Estate Institute, said they would restrain the current market, but it simply required more supply.

“The best intervention in the housing market is the government’s efforts to rapidly expand the supply of housing, especially community housing,” Hogan said.