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Cash Rate on Stand-By at 2%: What the RBA April ’16 Announcement Means for Property
It’s another month on stand-by with the Reserve Bank of Australia (RBA) once again leaving the cash rate at two percent, where it has been since May last year. This month, however, the decision was made from Hobart, where the RBA met in order to get a better understanding of the broader Australian economy. C&G has the latest.
This month’s announcement marks the tenth consecutive meeting in which the status-quo has been left at even keel – and it seems that the property market is similarly stable.
In Governor Glenn Stevens’ official Monetary Policy Decision announcement, he confirmed that ‘low interest rates are supporting demand, while supervisory measures are working to emphasise prudent lending standards and so to contain risks in the housing market.’
Indeed, such measures have affected investors more than home buyers. With Australian banks now required to assess loans somewhat differently, and the cash rate remaining at the all-time low of two percent, banks are reducing their risks (and consumers’ risks) by including a buffer on actual interest rates.
Loaning for investors is becoming increasingly expensive while for hopeful home-owners, interest rates are still highly competitive.
Glenn Stevens also stated that ‘credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers. The pace of growth in dwelling prices has moderated in Melbourne and Sydney and has remained mostly subdued in other cities.’
But what would it take for the cash rate to change?
Peter Martin, Economics Editor at the Age, outlines the scope of it for the Sydney Morning Herald. ‘(The Reserve Bank is) of the view there are reasonable prospects for growth, we have the unemployment rate at 5.8 percent… national accounts show the economy growing at 3% a year – this provides a situation where the Reserve Bank doesn’t feel impelled to cut rates, but it notes that because inflation is low, it can – if required.’
Other factors include upcoming election campaigns, overseas central banks and the state of inflation, but for now, it’s another month on stand-by.
If you’d like to learn more about how the cash rate might influence your decision to buy in premium blue-chip suburbs like Elwood, Black Rock, Port Melbourne and Mount Martha – contact the friendly team at Chisholm and Gamon today.