Did the cash rate decision open up the market for home loans?

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We’ve been sitting around a record low official cash rate for five months now, and people have been waiting with bated breath to see if the Reserve Bank of Australia (RBA) will bring it down even further. While the RBA board elected to keep it at 2 per cent for October, there are still a number of factors suggesting there could be further cuts in the pipeline.

At it’s meeting today, the RBA decided to leave the cash rate unchanged at 2.0 per cent.

— Smartline (@AskSmartline) October 6, 2015
This should be very enticing to buyers, whether they’re looking at mortgage refinancing or their very first home loan. On top of this, there are suggestions that this stability is fostering a buyers’ market. But is it really true?

Buyers back in fashion

In an October 6 response to the cash rate decision, Malcolm Gunning from the Real Estate Institute of New South Wales was thrilled, noting that the market is now undergoing a period of change.

“It is now a buyer’s market,” he said. “After a period of solid growth as a result of record low interest rates the tide has now turned in favour of those seeking to purchase property to live in.”

The Housing Industry Association’s Senior Economist Shane Garrett also noted that a low cash rate was conducive to ongoing housing supply. This means that with five months in a row of a 2 per cent cash rate, you could have a plethora of choice when planning your home loan.

Is the low rate here to stay?

When you consider that the cash rate stayed at 2.5 per cent for nearly a year and a half, we could be in for a long period of stability at 2 per cent as well. According to RBA Governor Glenn Stevens, the growth in lending to people buying property has been more or less stable in the last few months, which is good news for buyers. Shane Garrett agrees:

“Low rates are here to stay for some time to come, with economic growth below trend, very subdued price inflation and the downside risks surrounding activity in China,” he said in an October 6 statement.

With this good news, it might be time to start talking to mortgage brokers. You could be able to lock in a very appealing interest rate for the next few years, and even variable rates could stay down in this period of stability.

 

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