As many leading experts predicted, the Reserve Bank of Australia has left the official cash rate sitting at 2% for August.
With unemployment stable and May’s rate cut still fresh in the minds of consumers, the Reserve Bank saw no reason to change rates this month.
Unfortunately for the Reserve Bank, it is sitting on a double-edged sword regarding the cash rate. While an increase could slow down the property markets in Sydney and Melbourne, it would have a negative effect on the rest of the country’s economy, which is still somewhat sluggish.
It is looking more and more likely that additional measures will need to be put in place in Sydney and Melbourne, so that other markets such as our own in Brisbane can continue to reap the benefits of low interest rates.
The decision is good news for buyers, with spring – or mortgage season as many like to call it – is just around the corner. This is the time of year when buyers start to get serious, which is always a good boost for the market, and low rates are likely to entice more people to commit to a property purchase.
If you are planning to purchase property while rates are low, my advice is to make sure you have budgeted for eventual rate rises. Some lenders have recently lifted their floor rates (the benchmark they use to determine if you can service your loan should rates rise) to 7% or higher, however this isn’t the case across the board.
A number of home loan interest rates currently sit around 4.5% for owner-occupiers, but the jump to 7% can have a significant impact on your monthly repayments. For a $400,000 home loan set at 25 years, this difference is $603.79 per month.
As to whether future rate cuts are likely, we will just have to wait to see.