Mortgage rates are up but RBA keeps cash rate on hold
Mortgage rates to investors are up as much as 50 basis points over the same time frame but the RBA has held the cash rate at 1.5% for a record 27th month.
That's the equivalent of two cash rate hikes, and variable rates for owner-occupiers have increased by 15 basis points over the past two months alone.
The rise in mortgage rates, particularly for investors who are now paying a 55 basis point premium over owner-occupiers, together with tighter lending conditions more broadly, has been a key factor in taking the heat out of the housing market.
Despite relatively strong economic conditions, with GDP running at a six-year high and unemployment at a six-year low, the recent core inflation reading was tracking at 1.7% and wages growth remains subdued.
The ongoing fall in Australian dwelling values is also likely to be weighing more heavily on RBA deliberations, with CoreLogic indices showing the housing market downturn is becoming more broad-based, with most regions around Australia showing a clear slowdown in growth rates, if not declining values.
Although mortgage rates have edged higher over recent months, the cost of debt remains at the lowest levels since the 1960s.
With the cash rate remaining on hold for the foreseeable future and funding cost pressures easing, we are likely to see mortgage rates remain close to their current levels which should help to keep a floor under housing demand, especially with housing affordability now improving and labour markets strengthening.