Brokers claim RBA should maintain interest rates

Another fall in the number of home loan approvals shows the national economy remains fragile and the Reserve Bank of Australia (RBA) should maintain its interest rate holding pattern, says mortgage broker network 1300HomeLoan.

The Australian Bureau of Statistics (ABS) found the number of home loans approved in January, 2014, fell 0.4 per cent seasonally adjusted compared to the previous month after a 1.9 per cent drop in December.

1300HomeLoan Managing Director John Kolenda said the figures highlighted how talk of a surging economy is off the mark and that any increase in the cash rate from the RBA was unlikely in the near future.

“Demand for home loans remains flat and the longer the RBA maintains its cash rate at the record low of 2.5 per cent the better as this has at least provided much needed stability for consumers,” Mr Kolenda said.

“Unemployment also is likely to rise with many companies forced to make job cuts. The retail sector is still not showing sustained improvement, while the resources sector continues to slow.”

Mr Kolenda said the challenge for the RBA would be how it managed monetary policy when the economy eventually turned the corner.

“The big issue for the RBA will be how it deals with this situation as any premature increase in official interest rates is likely to change consumer sentiment back to being conservative,” he said.

“Creating a more positive consumer sentiment has taken numerous rate decreases over the past few years.

“Pulling the trigger too quickly could have serious consequences for consumer confidence,” Mr Kolenda said.