C&G Unpacks April's RBA Announcement

Local Community

In February 2015, the Reserve Bank of Australia dropped interest rates to their lowest levels since the 1960s. On April 7th, the RBA released a media statement about its decision to leave the cash rate unchanged at 2.25%. In today’s blog, C&G examines what this latest announcement means for those already in the market and for those seeking to become property owners.

What has prompted the RBA to maintain the status quo in April? According to Governor Glenn Stevens (who released the board’s media statement), the decision to leave the cash rate unchanged was due in part to the anticipated growth of the global economy. He explains that the RBA board felt it appropriate to ‘hold interest rates steady for the time being.’ According to the Sydney Morning Herald, however, the RBA could be cutting interest rates again as early as next month. 

What does April’s decision mean for home owners and those looking to get into the market? In a nutshell, it means cheaper loans, more investment activity, growth in house prices – and both good and bad news for home buyers.

For those ready to purchase, many banks are passing on savings and introducing lower interest rates for home loans, which is great for those looking to buy. While those savings may not be enormous, the higher the mortgage repayments - the more money saved. Depending on your bank (or your broker), you may be able to lock in your finance at a lower rate. These favourable market conditions mean that hopeful first home buyers may face more competition for property – so be decisive and make a sound offer when you see a home that fits your requirements and budget.

The February interest rate cut (and the cash rate’s continuing unchanged status) may also mean a further influx of investors to the property market. According to Domain, a ‘smaller gap between the incoming rent and the outgoing mortgage repayments’ may see more investors returning to or entering the market.

For tenants hoping to purchase their first home, April’s RBA announcement will yield mixed responses. Saving money for a deposit is the primary challenge for tenants, and rising property prices (due to the low cash rate creating high property demand) means rising rental prices, too. Conversely, this news means good things for home owners: as high property demand and confident market sentiment may yield lucrative sales results for vendors, and more earnings from investment properties.