Interest rates stay on hold

Interest rates will stay on hold this month following a meeting of the RBA Board today.

In a widely anticipated move, the announcement comes despite an uptick in the rate of inflation in August, which saw a rise from 4.9 percent in July to 5.2 percent.

All four of the big banks predicted the official rate to remain steady at 4.1 percent for the October meeting, although NAB has forecast that a further 0.25 percent increase was still an option, possibly next month.

The board meeting was the first with Michele Bullock as governor, following the departure of Dr Philip Lowe last month. Dr Lowe was criticised for telling borrowers back in March 2021 that rates were ‘likely to remain at current levels’ until 2024. However, the RBA began raising the cash rate in May 2022 from 0.1 percent to 4.1 percent over a 12-month period in efforts to curb the rate of inflation.

Inflation peaked over the 12 months to December 2022 at 7.8 percent, well above target levels of between 2-3 percent.

CEO of the Real Estate Institute of NSW, Tim McKibbin, said despite the slight increase in inflation, it was important that rates remained on hold this month as the impact of earlier rate rises continues to play out.

“Until last week’s concerning CPI figures, which show the battle against inflation is far from over, it seemed a foregone conclusion that the new-look RBA Board would leave rates unchanged when it meets tomorrow,” he said.

“REINSW believes it is appropriate for rates to remain steady for at least the short-term.”

CoreLogic Research director Tim Lawless said the rate of rising home values had slowed over the past quarter as cost of living pressures kept a firm grip on household budgets.

He noted that the Board had sought a balance between supply and demand in the economy.

“Clearly inflation remains high on the RBA’s risk radar,” he said. “Higher fuel and energy prices, alongside persistently high services and rental inflation have the potential to trigger another rate hike later this year.

“Logically, the RBA will be waiting to see September quarter inflation data, released the week ahead of the RBA’s November meeting. With this in mind, the November meeting will be closely watched.”

Former President Donald Trump said he would ban undocumented immigrants from obtaining home mortgages, a move he indicated would help ease home prices even though these buyers account for a tiny fraction of U.S. home sales.

Home loans to undocumented people living in the U.S. are legal but they aren’t especially common. Between 5,000 and 6,000 mortgages of this kind were issued last year, according to estimates from researchers at the Urban Institute in Washington.

Overall, lenders issued more than 3.4 million mortgages to all home purchasers in 2023, federal government data show.

Trump, the Republican presidential nominee, made his comments Thursday during a policy speech to the Economic Club of New York in Manhattan.

Housing remains a top economic issue for voters during this presidential election. Rent and home prices grew at historic rates during the pandemic and mortgage rates climbed to levels not seen in more than two decades. A July Wall Street Journal poll showed that voters rank housing as their second-biggest inflation concern after groceries.

Both major candidates for the 2024 presidential election have made appeals to voters on housing during recent campaign stops, though the issue has so far featured more prominently in Vice President Kamala Harris ’s campaign.

Trump has blamed immigrants for many of the nation’s woes, including crime and unemployment. Now, he is pointing to immigrants as a cause of the nation’s housing-affordability crisis. Yet some affordable-housing advocates and real-estate professionals said Trump’s mortgage proposal would fail to bring relief to priced-out home buyers.

“It’s unfortunate that given the significant housing affordability crisis that is widely acknowledged across most partisan lines, we are arguing about a minuscule segment of the market,” said David Dworkin, president of the National Housing Conference, an affordable-housing advocacy group.

Gary Acosta, chief executive of the National Association of Hispanic Real Estate Professionals, a trade organization, said, “It’s just another effort to vilify immigrants and to continue to scapegoat them for any issues that we have here in the United States.”

A Trump campaign spokeswoman didn’t immediately respond to a request for comment.

Undocumented immigrants in the U.S. can obtain an obscure type of mortgage designed for taxpayers without Social Security numbers, most of whom are Hispanic. The passage of the USA Patriot Act of 2001 allowed banks to use identification numbers from the Internal Revenue Service as an alternative to Social Security, extending a number of financial services to people without legal status for the first time.

Mortgage loans for undocumented immigrants are typically higher interest and borrowers include legal residents who have undocumented spouses, Acosta said. Lenders include regional credit unions and community-development financial institutions.

In his speech, Trump said that “the flood” of undocumented immigrants is driving up housing costs. “That’s why my plan will ban mortgages for illegal aliens,” he said.

Trump didn’t elaborate on how he would enact a ban on such loans.

Though mortgages for undocumented people living in the U.S. are relatively rare, residential real-estate purchases by foreign nationals are big business , especially in expensive coastal cities such as New York and Los Angeles. These sales have declined in recent years, however.

Close to half of foreign purchases are made by people residing abroad, while the other half are made by recent immigrants or residents on nonimmigrant visas, according to an annual survey by the National Association of Realtors. Many affluent foreigners buy U.S. homes with cash instead of obtaining mortgage financing.

In his Thursday speech, which focused mostly on other economic matters such as energy and taxation, Trump proposed other measures to bring down housing costs, including cutting regulations for builders and allowing more building on federal land. Similar ideas appeared in the housing policy outline Harris released in August .

The former president has spoken on housing-related issues in speeches at other recent campaign stops, including in Michigan last month, where he touted his administration’s 2020 overturn of a policy that had encouraged cities to reduce racial segregation .

“I keep the suburbs safe,” Trump said. “I stopped low-income towers from rising right alongside of their house. And I’m keeping the illegal aliens away from the suburbs.”

Interest rates stay on hold – for now

The new-look RBA Board takes a careful middle road as mortgage holders continue to feel the pinch

The Republican nominee says it would help bring down home prices, though these buyers account for a fraction of U.S. home sales