Rates on hold as inflation pulls back

It is highly unlikely that Australian banks will experience a similar situation to what is occurring in the US but the RBA needs to move carefully as Australia is not immune to a shaky global financial situation. Silicon Valley Bank’s collapse came about because they were betting on interest rates to remain ultra low for a long time and were holding a lot of long term bonds. Interest rate increases meant the value of the bonds collapsed and a bank run resulted. Credit Suisse’s problems have been a long time coming and problems in US banks exacerbated negative sentiment towards them. In Australia, our banks hold a very low proportion of tradable securities and also have significant liquidity should a bank run begin.

With the outlook for interest rates now looking far more positive for mortgage holders and those looking to buy a home, it is no surprise that house prices continue to move upwards. Price growth began again in December last year and is likely to continue for the remainder of the year.