It was widely expected that the Reserve Bank of Australia would cut the cash rate at its August meeting and the Board delivered, dropping the official cash rate to 1.50%.
Earlier this year central banks around the world took drastic measures to stimulate their respective economies, but here in Australia the Reserve Bank remained unnerved by what was happening globally.
Recently, however, our own domestic inflation figures have been below target and this has the Board worried. So after yet another round of low inflation figures was released at the end of last month, it become highly likely that Australians were on track for another rate cut.
That now leaves the cash rate at an all-time low of 1.50%. It is hoped that a lower cash rate will help to put inflation back on track and boost our waning consumer confidence. New data from the Westpac Melbourne Institute of Consumer Sentiment showed that confidence dropped by 3% in July, reflecting the dampened mood of Australian consumers.
Following yesterday’s decision, two questions now remain:
- Which lenders will pass on the savings?
- Will the rate cut further inflate housing prices?
There is widespread concern that the decision to cut interest rates will cause house prices to spike as we come into the busy spring season, however Governor Glenn Stevens is confident this won’t be the case.
In his statement yesterday, he explained that stricter lending standards, slow housing market growth this year and a rising supply of apartments will keep house prices steady. These concerns are targeted specifically at the Sydney and Melbourne markets and it looks unlikely that we will see too much movement here in Brisbane.
News of a cut to the cash rate won’t come as a surprise to most lenders, but we will just have to wait and see who will pass on the cut in full to their borrowers.
At this stage it seems home owners can expect to save 0.10–0.14% on their mortgage, depending on which lender you are with.
The latest Brisbane property market stats
- Official cash rate: 1.50%
- Brisbane median house sale price: $590,000*
- Brisbane median unit sale price: $435,000*
- Auction clearance rate: 50%
- Interest rates starting from 3.69% p.a.**
*These are the latest RP Data figures from June, 2016. They are based on data from the Brisbane City Council catchment only.
** Following the decision to cut the cash rate, deals on interest rates are likely to change in the coming weeks.
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