RBA holds firm amid growing expectations of rate cut

The Reserve Bank of Australia (RBA) has held the cash rate at 1.5% at its May meeting today despite growing expectations of a rate cut this year.

The flat CPI reading for the March quarter wasn't enough to drag interest rates lower, although the likelihood of a cash rate cut over coming months remains high.

While inflation remains below the target range of the RBA, labour markets generally remain relatively strong, supported by NSW and Victoria, and the decline in housing values has lost some speed over recent months.

If the cash rate does move lower later this year, a reduction in mortgage rates would provide some support for housing demand, however, we may not see quite as much stimulus for housing market conditions that we have seen after previous rate cuts.

Generally, housing sentiment remains low and borrower mortgage serviceability is still assessed based on mortgage rates of at least 7%.

Households who already have a mortgage, or prospective borrowers who are able to satisfy lender credit policies, will be the winners if interest rates do fall later this year.

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