RBA leaves interest rates at 0.1% in first meeting of 2021

The Reserve Bank of Australia decided to leave interest rates unchanged at its first meeting of the year this afternoon. The cash rate currently sits at 0.1 per cent, where it has remained since November 2020.

In his post-meeting statement, RBA Governor Philip Lowe said that while the path to recovery will be uneven, "there are better prospects for a sustained recovery than there were a few months ago."

The Board forecasts GDP growth of 3½ per cent over both 2021 and 2022, but a backwards slide on the health front “would delay the recovery and the expected progress on reducing unemployment.”

“On the other hand, it is possible that further positive health outcomes would boost consumer spending and investment, leading to stronger growth than is currently expected” said Lowe.

The RBA slashed interest rates to emergency lows last year to shore up a struggling economy. It also launched a large scale bond buying program to bring down longer-term fixed rates, officially putting Australia on the quantitative easing path.

To date, the RBA has purchased $52 billion worth of government bonds. It has not made any purchases in support of the 3-year yield target since early December.

Lowe once again said the cash rate won’t increase for at least another three years, but the quicker than expected recovery has many analysts betting the Board will soon change its tune.

While the unemployment rate remains elevated at 6.6 per cent, the number of jobless Australians continues to tick down. At last reading, employment rose by 50,000 people in December 2020 according to the ABS.

The Board’s central scenario sees unemployment remaining at around 6 per cent at the end of the year and 5½ per cent at the end of 2022.

Where do mortgage rates currently sit?

The RBA’s stimulus measures have flooded the system with cheap cash, allowing lenders to bring fixed rates to all-time lows. Among those we track at Mozo, the average 2-year fixed rate currently sits at 2.34% p.a.

Notably, online lender UBank recently discounted its 3-year fixed rates to 1.75% p.a. (2.22% p.a. comparison rate*), making it the lowest in our database. However, the offer is only available until 26 February, 2021.

Current rate settings have been a boon for the housing market, with all capital city and rest-of-state regions posting an increase in values in January according to property research firm CoreLogic.

“Record low interest rates played a key role in supporting housing market activity, along with a spectacular rise in consumer confidence as COVID-related restrictions were lifted and forecasts for economic conditions turned out to be overly pessimistic,” said CoreLogic research director Tim Lawless.

For more information about mortgage and lending trends, visit our home loan statistics page. And if you want an idea of where interest rates currently sit, browse our home loan comparison page, where you’ll be able to filter your search by rate and type.