Property Market Information: What does the new cash rate mean?

By the resi financial blog team, 05 February 2015

Property Market Information: What does the new cash rate mean?

The big news this week was the decision by the Reserve Bank of Australia (RBA) to cut the cash rate by 25 basis points to 2.25 per cent. This is a new record low after the longest period of interest rate stability experienced by the country, which was at the previous lowest rate on record as well.

This move can be seen as the bank responding to market conditions, especially a soft economic performance towards the end of last year, and seeking to stimulate consumer activity.

According to Master Builders Australia, the new cash rate could have arrived just in time, as Australia posted its highest level of dwelling approvals ever, meaning more housing stock will be available for purchase in the coming months.

"The ABS building approval figures released today that show 200,814 approvals in 2014, support Master Builders forecast of a looming residential building boom in 2015, and challenge preconceptions that the approvals growth cycle had peaked," said Peter Jones, chief economist of Master Builders Australia in a February 3 statement. 

The Housing Industry Association (HIA) has pointed out that new residential construction has been one of the best performers in the Australian economy over the past few years and generated significant amounts of employment. The country's economic downfall, according to Harley Dale, HIA chief economist, has been domestic consumption and investment not experiencing the same level of activity.

"A further 'touch down' to interest rates will help maintain very healthy levels of new home building while hopefully broadening the base of Australia's economic growth," said Dr Dale.

"The Reserve Bank has also indicated that the Australian dollar needs to fall further and it sees another interest rate cut as helping to achieve that outcome."

If you're wondering how cuts in the interest rate could affect your housing plans or home loan, call into your local resi branch and talk to a loan specialist for some friendly help and guidance.

Categories: Home Loans