RBA’s rate rise catches industry unawares

Wednesday the 7th of October, 2009

Posted by Iden Money .

Source: mortgagebusiness.com.au

The Reserve Bank of Australia’s decision to raise interest rates yesterday by 25 basis points took most by surprise.

According to Mortgage Business’ recent straw poll, 71.8 per cent of brokers didn’t expect the RBA would raise rates in October. Of the 351 respondents only 25.4 per cent tipped the RBA to raise rates while 2.8 per cent were unsure.The Real Estate Institute of Australia (REIA) president David Airey slammed the RBA’s rate rise and said it was likely to be followed by a further 25 basis points next month.

“In home loan terms, I believe the variable rate will gradually rise from 5.5 per cent to around 7.5 per cent over the next 2 years,” Mr Airey told Mortgage Business.

“The RBA has lifted rates in response to the threat of a potential housing bubble. However, the risk of a bubble remains low with housing supply low and new dwellings down 50 per cent.

Mr Airey said that rather than waiting for the September figures and analysing the data carefully to see exactly where the market is moving the RBA acted on older information – the most recent being August figures.

Loan Market executive director John Kolenda also believed the RBA had been too hasty in its decision to raise rates.

“The rate rise will hurt consumer and business confidence and possibly have an adverse impact on a national housing market which has so far weathered the global economic downturn,” Mr Kolenda said.