Home loan rates on hold as RBA reads the China tea leaves

The Reserve Bank of Australia has left its interest rates options open at its board meeting this afternoon, as it searches for clues on how the rest of the year will pan out.
The Reserve Bank was expected to keep the cash rate at a 49-year low it set a few months ago, with economists split on which way the mortgage rates will move next, up or down, and that will depend on domestic and International factors.
Some say home owners and home buyers can expect a little more good news towards the end of the year as rising costs and rising unemployment are forecast to pressure the Board to iron out any wrinkles with a still lower debt cost to borrowers.
On the other-hand some in the banking sector are saying that the rate move will be up, and they are already preparing plans to raise home loan rates themselves.
Reserve Bank governor Glenn Stevens said today that the global economy was stabilising after a “sharp contraction” in the December and March quarters.
“Growth in China has strengthened considerably, which is having an impact on other economies in the region, including Australia,” he said.
“Although job ads are drying up, the unemployment rate is still low and we have not seen the massive jumps in the ranks of the unemployed that the US and the UK have endured.” “So the real numbers that the RBA will move interest rates south on is unemployment rates, and if we might be moving to the 10% predicted earlier this year, then a rate cut would be on the cards.” Rick Adlam [Mr Mortgage] said. “Businesses may have shelved investment plans, but have not shed workers up to this point, as good talent will be hard to attract if the economy grows”.
“The other figure of concern will be inflation and we all know that fuel price hikes, due to a removal of a subsidy to the oil companies by the Queensland State Government will move everything higher. When you add dramatic rises in council rates and electricity tariffs will also have a nation-wide knock on effect on prices and inflation.”
“But with a pick up in housing demand and mortgage finance we are seeing housing prices stabilising, with the possibility of price rises in the near future in some high demand areas. So interest rates remain will remain in the balance.” According to Mr Mortgage

About: Rick Adlam: Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers. Website: http://www.mrmortgage.com.au