Interest rates kept on hold at 0.1 per cent

The Reserve Bank of Australia has kept the nation's official interest rate on hold at the historic low level of 0.10 per cent.

RBA economists met this afternoon, deciding to keep the cash rate on hold despite record-breaking growth in the property market and fears Australia is approaching a housing affordability crisis.

The central bank has come under increasing pressure to lift interest rates earlier than its expected date of 2024 as the price of property far outstrips the growth of Australian wages.

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In his monetary statement, RBA governor Philip Lowe noted the property market, but said other variables such as employment and inflation were prompting the bank to hold its hand.

"Housing prices have risen strongly over the past year, although the rate of increase has eased over recent months," Dr Lowe said.

"Housing credit increased by 6.7 per cent over the past year, but, more recently, the value of housing loan commitments has declined from high levels.

"With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers."

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Chief Economist at AMP Capital Shane Oliver said he expects interest rates to begin moving upwards from as early as November 2022.

"The combination of slightly higher than expected inflation than the RBA is anticipating, a decline in unemployment to around 4 per cent over the next 12 months and a faster than expected pick up in wages growth taking it to near 3 per cent are expected to see the RBA start raising interest in November next year," Dr Oliver said.

Alex Joiner from IFM Investors said the RBA was waiting to see the impact of opened borders before making a change to monetary policy.

"The RBA is wanting to see improvements in the labour market lift wages growth and drive inflation," Mr Joiner said.

"I expect it will want to gauge the state of the economy through 2022 as tailwinds fade and borders reopen before concluding it is on a sustainable path to achieving this objective."

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RateCity.com.au research director Sally Tindall said for many borrowers the rate their lender offers is far more important than any move by the central bank.

"Even if the RBA doesn't hike rates in 2022, it's entirely possible banks will. To date, the rising cost of funding has only affected fixed rates," Ms Tindall said.

"However, it could get to a point where lenders decide they also need to hike variable rates ahead of any official move from the central bank."

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

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