RBA Cuts Cash Rate Again
What does the latest rate cut mean for the real estate market?
In an attempt to boost the economy, the Reserve Bank of Australia has today cut the official interest rate to the lowest level of on record.
The official cash rate is now sitting at just 1% after being cut another 0.25%, down from 1.25% last month. This the first back-to-back cut since 2012, and last month was the first cut in almost three years.
Today’s announcement by RBA governor Philip Lowe was widely expected by economists.
"It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target," Dr Lowe said in a post-meeting statement.
Borrowers are big winners here, as this move could save the average home loan customer about $600-$1,000 a year on their repayments if the banks actually pass on most or all of the savings. Mortgage rates for owner occupiers are already around the lowest level since the 1960s.
And whilst households will welcome the savings, lower rates should offer homeowners further support by propping up the housing market.
The prospect of cheaper borrowing comes after the bank regulator APRA proposed a revision of strict lending guidelines, meaning borrowers would be tested for their ability to repay a loan at a lower hypothetical interest rate than in the past.
The proposed APRA changes seem sensible given the current low interest rates and the expectation that rates will continue to remain lower for longer.
Overall for the housing market, lower mortgage rates will help to make housing more affordable. CoreLogic head of research Tim Lawless said the RBA’s move to cut the cash rate last month has already helped to boost housing demand and put a brake on price falls in Australia’s major cities.
In June, Melbourne dwelling values grew for the first time since November 2017 with a 0.2% increase in values according to Corelogic.
Melbourne has been experiencing the highest auction success rates since early last year, with clearance rates climbing from 60% to above 70% in recent weeks and buyer interest and inspections have all seen a significant increase.
What does this rate cut mean for you? If you have a mortgage or are considering borrowing, it’s probably time to talk to a mortgage broker and explore whether there’s a better option out there for you.
I can help connect you with a good mortgage broker if you need one!