Interests slashed to a new all time low!
Interest rates have reached a new all time low following the Reserve Bank Board’s decision on Tuesday to take another 0.25% off the cash rate. The cash rate now stands at 1.5%. It was the first cut since May 2016 and had been predicted by the majority of financial experts.
Why was the rate cut?
The primary reason cited was inflation. The latest inflation data confirms price growth well below the RBA’s preferred range, despite the fact that the latest economic indicators have been relatively neutral. So in a nutshell, the cash rate was cut because the RBA Board felt it necessary to create a stimulus for the economy, as inflation remains low.
Are lower interest rates having an effect on the housing market?
Low interest rates are having a positive effect on the housing market with strong buyer activity since the last rate cut in May resulting in substantial price growth in most capital cities. This latest cut is expected to keep that momentum going as we approach the spring selling season.
Will the rate get any lower?
The expectation is that the RBA will follow up this month’s decision with another rate reduction – perhaps not next month but in the near future – particularly if inflation continues to drop and the labour market deteriorates (currently the labour market is steady).
How have the Banks responded?
Within minutes of the RBA Board’s announcement to take another 0.25% off the cash rate, the Commonwealth Bank of Australia (CBA) responded with an announcement that it would pass on just 0.13% to mortgage holders.
The other 3 of the Big 4 Banks (NAB, ANZ and Westpac) quickly followed suit with announcements that they too would not be passing on the rate cut in full.
NAB has passed on 0.10%, ANZ – 0.12% and Westpac – 0.14 for those paying principal and interest and just 0.10% for those paying interest only.
Bank Executives cited, “the need to balance costs and shareholder returns and the need to strengthen balance sheets and increasing funding costs” as the basis for their decision not to pass on the full rate cut to customers.
This is by no means the first time that the banks have held back some of the RBA cuts. In May this year, when the RBA cut the rate by 0.25%, an average of 0.18% was passed on to customers.
Evidence of stronger buyer activity on the home front
In last week’s newsletter, Zoe our roving property reporter, introduced readers to a stunning architecturally designed property at Booragoon that was being launched on the market last weekend. We had a huge response from the market with 27 families inspecting 61 Dickenson Way Booragoon over 2 open homes. The result is that the property is now Under Offer after just 1 one weekend! While we can’t yet reveal the acceptance price, we can tell you that the owners are over the moon with the pending result!
With 26 families missing out on buying this property it just goes to show how important it is to put your best offer forward if you find a property that ticks all the right boxes. It also means we have a number of buyers in our database who are still on the hunt for a property to buy. Contact us if you’re thinking of moving and would like us to give you an obligation free property appraisal. Knowing what your property is worth in today’s market will allow you to work out the numbers to see if moving is the right decision for you.