C&G Unpack June’s RBA Announcement

Real Estate News

In May, the Reserve Bank of Australia dropped cash rates to a record low of 2 per cent. Yesterday, RBA Governor Glenn Stevens issued his June statement, announcing that the board has decided to leave the cash rate unchanged. In today’s blog, C&G unpack this latest decision and how it may impact upon home owners and potential purchasers. 

Until May, the national cash rate was steady at 2.25 per cent (its lowest figure since the 1960s). This figure has since been lowered in response to the ‘accommodative’ nature of global financial conditions according to the RBA media release (this drop was predicted by the Sydney Morning Herald as noted in C&G’s last RBA announcement blog). In Australia, household spending has improved, exports are rising, and construction is up: the economy is growing (albeit below its longer-term average and despite a ‘drag’ on private demand). According to the release, ‘the economy is likely to be operating with a degree of spare capacity for some time yet.

In a nutshell, the RBA has decided to leave the national cash rate ‘as is’ in order to assist with borrowing and spending, and to remain ‘accommodative’ of global trends. The Australian dollar jumped after June’s announcement, despite Governor Glenn Steven’s predictions to the contrary in the RBA media release. 

How might this affect home owners and hopeful purchasers? In February, variable home loans dropped by an average of 0.23 per cent, before falling further to 0.21 per cent in May. Likewise home loan rates dropped from 4.98 per cent to 4.72 per cent, and deposit rates dropped from 2.75 per cent to 2.48 per cent. These discounts are a double-edged sword for home buyers: home loans are cheaper but house prices continue to rise, so saving for a deposit may prove challenging. Rising property prices can often also mean rising rental prices, which in turn can affect one’s ability to save. On the flipside, the cheaper loans and high property demand may mean better sales outcomes for home owners and higher income for investors.

The results present a mixed bag – much like the reaction to the latest RBA announcement.