Market/Finance News Blog: Cash rate decision time!

By the resi financial blog team, 03 February 2015

Market/Finance News Blog: Cash rate decision time!

Since economic figures for the end of 2014 were revealed, many industry commentators and finance experts have begun to favour a drop in the cash rate at some point this year. At the meeting of the board of the Reserve Bank of Australia (RBA) on February 3, the decision was revealed.

There was a drop of 25 basis points, resulting in a new record low cash rate of 2.25 per cent.

RBA Governor Glenn Stevens noted that the previous year-and-a-half period of stability had allowed the bank to assess the economic effects of easing monetary policy on the country as a whole.

"At today's meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate," said Mr Stevens in the February 3 announcement.

"This action is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target."

The actions of the RBA point toward a need to stimulate lending activity, as a precursor to encouraging consumer spending and dwelling finance commitments - especially those for new housing stock.

Neville Sanders, president of the Real Estate Institute of Australia (REIA) said the RBA had made the right move, easing the cost of housing for homeowners and property purchasers around Australia. He also noted the need for lenders to pass the benefits of the cuts on to consumers.

"Since the RBA began its cutting of the official interest rate in late 2011, the proportion of the median family income required to meet monthly loan repayments decreased 4.4 percentage points from 34.8 per cent to 30.4 per cent," stated Mr Sanders.

If you'd like to know more about how the cash rate decision could affect your investment home loan or first home purchase, contact resi today and speak to a loan specialist.

Categories: Home Loans, Property Investment