Picture: AAP/Dean Lewins.

The Reserve Bank of Australia has kept interest rates on hold once again, leaving the official cash rate at 1.5%.

It has now been two years since the rate dropped by 25 basis points to the historic low – the longest period without a change.

The decision was announced at RBA’s monthly monetary meeting today.

Last week, Westpac became the first Big Four bank to increase its variable interest rates for homeowners, adding 14 basis points to cover wholesale funding costs, effective by 19 September.

The decision follows in the footsteps of smaller banks and lenders moving out of step with RBA and raising their rates, including Macquarie, Bank of Queensland, Suncorp and ME Bank.

REA Group Chief Economist Nerida Conisbee says this trend provides “even less reason for RBA to raise the cash rate because the banks are already slowing down the economy by doing that.”

“The banks are increasing their interest rates because Australians borrow more than they save, so the banks have to borrow money from overseas to cover their costs,” she says.

“The RBA says the next move will be up but it’s taking a long time for the economy to be strong enough.

“Consumers aren’t spending enough, aren’t getting the salary increases they want. Business confidence is up but consumer confidence is still low.

“Rates in places like the UK and US are on the increase, but Australia is stable and not moving.”

National house prices were down for the eleventh consecutive month in August, according to the CoreLogic Hedonic Home Index, showing a drop of 0.3% across the month.

Five of the eight capital cities recorded a fall in house values for the month, with only Adelaide, Darwin and Canberra bucking the trend.

Tighter lending conditions, reduced market competition and mortgage rate rises are contributing to the softened market.

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