Property Market Information: Business as usual for RBA's cash rate

By the resi financial blog team, 05 March 2015

Property Market Information: Business as usual for RBA's cash rate

Mortgage rates can be unpredictable - even when they are at their most consistent. Amidst flying speculation, The Reserve Bank of Australia (RBA) announced its decision to keep the official cash rate steady at 2.25 per cent on March 3, with house prices weighing heavily on their decision.

Governor Glenn Stevens pointed out that declining commodity prices and the fluctuating Australian dollar would still play a part in the decision to trim interest rates even further, the flip side of their decision is burgeoning home values, especially in Sydney. 

"The Bank is working with other regulators to assess and contain risks that may arise from the housing market," he said.

The Australian Prudential Regulation Authority is keeping a close watch on developments here, but considering that prices in Sydney and Melbourne prices surged 13.7 and 7.4 per cent respectively according to CoreLogic RP Data over the year to February alone, it's likely it will introduce some new tools to get a hold on growth.

However, the Housing Industry Association said the bank's decision would be a let down for mortgage holders and small businesses in particular. Senior Economist Shane Garrett noted that an early rate cut would have been a welcome relief for the lagging economy. In any case, the Reserve Bank did hint that it would pursue another rate cut in coming months, but Mr Garrett pointed out that an April cut would remove uncertainty. 

"There had been hopes that the RBA would reduce interest rates today in order to provide additional support," he said. 

"At this time, it is very fortunate that new home building is providing such vital support to demand, with ABS data earlier today showing new dwelling approvals hitting another new record in January."

While it wasn't the result that many industry commentators were hoping for, there is an element of compromise. A further cut would likely encourage ferocious demand for property, which could push Sydney prices even higher. 

This highlights how important it is for investors to remain up to date with the latest policy developments, as they can have a large influence over how you finance your property. If you are interested in an investment loan for a property, talk to the loan specialists at resi for some great options. 

Categories: Home Loans, Property Investment