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Buyers' opportunities as Reserve Bank retains low cash rate

On Oct 02 2013
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  • News

The official cash rate has been retained at the historically low level of 2.5 per cent, following ...

The official cash rate has been retained at the historically low level of 2.5 per cent, following the Reserve Bank of Australia's (RBA) decision on the matter earlier this week (October 1).

This news could be fantastic for anyone considering purchasing property in the near future.

Regardless of whether you're a first home buyer, looking to upsize or downsize your family home, or simply want to expand your investment property portfolio - this decision could have a bearing on your future real estate movements.

Since the RBA began reducing the cash rate back in November 2011, the cash rate has dropped by 2.25 percentage points over that two year period. The current historically low level was reached back in August and has been influencing the real estate market since then.

Glenn Stevens, governor of the RBA, said in an October 1 statement that the decision came in response to an increase in interest-sensitive spending and increasing consumer confidence.

"The pace of borrowing has remained relatively subdued to date, though recently there have been signs of increased demand for finance by households," said Mr Stevens in the statement.

Normally, the cash rate has a direct relationship with the interest rates that lenders can provide to potential home buyers on their home loans. As the cash rate decreases, it usually follows that home loan interest rates will as well.

This helps to improve the overall affordability of property , allowing people to secure a mortgage with a lower interest rate in the long term - giving them the potential to save money on their home loan by cutting out thousands of dollars worth of interest over the life of their loan.

The decision has received praise from a number of housing industry groups, including the Real Estate Institute of Australia (REIA).

REIA Chief Executive Officer Amanda Lynch said that the RBA have made a "considered and accurate assessment of the property market", with their cash rate decision reflecting a commitment to increasing housing affordability for the nation.

"As a result of the easing monetary policy, housing affordability in Australia is now at its
lowest level in a decade. Nationally, it now takes 28.7% of the median family income to
meet average loan repayments," said Ms Lynch in an October 1 statement.

Maintaining the low cash rate level gives first home buyers the opportunity to secure their own home with relative ease, offering them the chance to get a low interest rate to sustain them heading into the future.