Surprise RBA decision on rates

In an unexpected move, the RBA decided to raise the nation’s official cash rate to 1.75 per cent.

Prior to the RBA’s meeting on Tuesday, 37 of the 38 experts and economists from the finder.com.au RBA survey believed that the cash rate would remain unchanged.

However, expectations of a rate rise had increased, with 86 per cent of the 36 experts who opted to answer this question believing that the next rate move would be up. This was a rise from 68 per cent last month.

However, 70 per cent of experts who gave their forecast said a rate rise wasn’t likely to occur until 2018.

Mortgage Choice CEO John Flavell noted that today’s decision marks the first rate increase in more than six years.

“While I am slightly surprised by the timing of the rate increase, I knew the Reserve Bank would be inclined to increase the cash rate sooner rather than later,” Mr Flavell said.

“Strong economic conditions and a robust property market would have encouraged the Reserve Bank of Australia to adjust their stance on monetary policy.

“Given that long-term bond rates have been rising and many of Australia’s lenders have started to lift interest rates across their suite of home loan products, I think it is fair to say that a rise in the cash rate was never too far away.”

Over the last few weeks, many lenders have lifted their rates, some by as much as 39 basis points across certain products, Mr Flavell said.

“Despite these rate movements, it is important to remember that interest rates remain low by historical standards.”