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Cash rate at a standstill

On Oct 08 2014
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One crucial driver of housing demand is the official cash rate from the Reserve Bank of ...

One crucial driver of housing demand is the official cash rate from the Reserve Bank of Australia (RBA), which is announced each month and generally directs how lenders set their interests rates. This is vital for anyone seeking to buy property who will need to take out a mortgage.

The RBA have met for this month, and decided the cash rate will remain unchanged at 2.5 per cent. This marks the fifteenth consecutive month without a variation from this level.

Glenn Stevens, Governor of the RBA said in his monthly statement that there is moderate growth in the Australian economy, but they expect overall growth to be below trend in upcoming quarters. 

There has been an increase in lending options for Australians, which has created competition that drove down interest rates a little - an enticing prospect for property investors to get into the market. Mr Stevens also noted that investors are responding to low interest rates by pushing for higher returns on their purchases. 

Housing investors have also been behind recent growth in the credit market as they take out more loans for property. 

With interest rates expected to stay low yet again, there could be room for further investment right across the board. This should please first-time buyers and people with expansive portfolios alike. 

The RBA believe that monetary policy is well-geared to maintain growth and demand for the next period, and that this should see continued stability in interest rates, with inflation of 2 per cent to 3 per cent over the coming years. 

Industry voice pleased with result

The cash rate remaining steady was predicted by many, including Housing Industry Association Senior Economist Shane Garrett. 

"Significantly, the RBA has repeated its view that the economy requires a period of stable rates," he noted in a statement.

"This will provide a welcome degree of certainty to those engaged in the housing industry, as well as other areas of the economy."

Mr Garrett also made further predictions for the coming months, stating his belief that the cash rate should remain unchanged well into 2015. This is to address the weaker labour market and price inflation, as well as the strength of the Australian dollar. 

He is pleased the interest rate is staying low as it helps to drive dwelling construction, which has been low in recent months. 

"However, ensuring that home building meets demand over the long term means that the issues which continue to stifle supply must be addressed."

With interest rates and home construction conditions staying favourable, the future looks good for anyone in search of real estate.