Market/Finance News Blog: Record low mortgage rates support households

By the resi financial blog team, 10 March 2015

Market/Finance News Blog: Record low mortgage rates support households

In its February 3 board meeting, the Reserve Bank of Australia (RBA) noted that its rate cut was intended to support mortgage holders and boost consumer confidence. Many industry bodies were disappointed with its decision to keep the current rate intact last week, but new research from CoreLogic RP looks to back up this decision.

The research reveals that the record low interest rates are saving the everyday mortgage holder a substantial amount of money. In a March 9 release, CoreLogic analysis shows that before rates started on their downhill run back in 2011, a $400,000 home loan would accrue around $27,200 in interest per year. Following the most recent cut, the average variable rate on a mortgage sits at 4.9 per cent - bringing interest payments down to $19,400.

Homeowners and buyers alike could feel the benefits. Based on these figures, households save a significant $150 a week - enough to put a spring back in consumers' step. The housing market is continuing to play a main role in the Australian economy. The Australian Bureau of Statistics found that the economy grew 0.5 per cent in December last year, bolstered by a 0.1 per cent contribution by the construction industry.

In fact, the Housing Industry Association shows that, ahead of the most recent cut, the number of new home sales rose 1.8 per cent in January, while CoreLogic revealed that auction activity across the country has soared to peaks not reached since 2009. According to Robert Larocca, auctions specialist at RP Data, the low interest rates look to have invigorated buyer sentiment. The national clearance rate remained above 70 per cent for the fourth week in a row as of March 9, showing that vendors are reaping the rewards of ferocious demand.

If this continues to improve, Australia's economic development could be in good stead as the year progresses. With savings a real possibility, why not get in touch with a resi loan specialist for a great range of home loan options

Categories: Home Loans