The Reserve Bank of Australia says rising mortgage interest rates pose no risk to the housing market, saying the cost of funding a home loan is still below that of a year ago.
In minutes of its September 4 policy meeting the RBA says that, at the time of the board gathering, lenders accounting for 40% of the market had raised mortgage rates (most by about 0.14 of a percentage point). “These increases would imply a small rise in the average housing loan rate, unwinding about half of the decline observed in the average housing loan rate over the preceding year,” it said.
Economists argue that increased mortgage interest rates will delay any official interest rate increase by the RBA. The banking sector has justified raising interest rates on the basis of higher wholesale funding costs. But the RBA says bank funding costs remain low relative to history and “consistent with the low level of the cash rate”.
The minutes indicate the RBA remains confident the next move in official interest rates will be upward as strong economic growth eventually converts to lower unemployment and higher inflation. But there is no rush to adjust the benchmark cash rate, which has remained at a record low 1.5% for more than two years.
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