Cash rate held for another month

Cash rate held for another month

Posted on Tuesday, September 01 2015 at 2:43 PM

The Reserve Bank of Australia (RBA) left the cash rate on hold once again this afternoon, at 2 per cent, which came as little surprise to most, with the finder.com.au survey finding that 31 of the 32 experts asked had expected as much.

Money Expert at
finder.com.au Michelle Hutchison says that
while the record low rates have been welcomed by many borrowers, they’re not
here to stay.

“The finder.com.au Reserve Bank Survey has found that it’s
not a matter of ‘if’ the cash rate will rise but, rather, ‘when’.

“However, there’s no
need to panic and borrowers should use this time to do their research and scan
the market to ensure they’re getting the best rate possible. Also, now’s the
time to prepare for future rate hikes by making extra repayments while you can.

“With the national
average auction clearance rate increasing by approximately 10 per cent over the
past 12 months, and the start of mortgage season just days away, we can expect
the property market to remain competitive in the coming months.”

The survey found that
19 experts (59 per cent) expect auction clearance rates to stabilise at the
current level, while one expert – Peter Boehm of onthehouse.com.au – believes
auction clearance rates will boost even higher this mortgage season.

“However, more than
one in three experts (11 experts or 34 per cent) expect auction clearance rates
to fall, despite mortgage season being traditionally billed as the hottest time
to buy and sell,” Hutchison says, adding that buyers who are planning to wait
until the property market settles may want to think again.

CoreLogic RP Data’s August housing market data along
with recent data on investor credit growth would have been welcome news to the board
when they were deliberating on the rate setting. 

Head of research Tim Lawless says: “The rate of
capital gain apparently eased across the housing market in August. After
capital city dwelling values increased by more than two per cent in both June
and July, capital city dwelling values grew by a much more sustainable 0.3 per
cent in August. 

“Additionally, recent credit data released by the RBA
shows the annual pace of growth in investment credit slipped from a recent
annual high of 11.1 per cent to reduce back to 10.8 per cent in July. 

“The slower month of housing data may indicate that
the housing boom in Sydney and Melbourne is starting to slow and investment
lending is starting to moderate in line with APRA guidelines.  

“While the Sydney and Melbourne housing markets don’t
need any further stimulus, other capital cities as well as regional markets
have recorded much more sustainable growth rates. In fact, dwelling values
declined across four of the eight capital cities over the month of August and
three capital cities – Perth, Darwin and Canberra – have recorded a decline in
dwelling values over the past 12 months. 

“Home owners and prospective buyers across Australia
will welcome the sustained low interest rate setting, which will continue to
spur buyer demand and help offset the effects of softer economic conditions
outside Sydney and Melbourne.”

Hutchison has a message for buyers: “Regardless of when you’re buying, ditch emotion and
consider what the future holds for the cash rate.

“When doing your
calculations, allow a two to three per cent buffer for future rate rises.
Remember, these record lows won’t stick around forever.”

 

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