Today, the Reserve Bank of Australia (RBA) decided to leave the cash rate unchanged at the record low of 0.75%.
Three cuts have been made since June 2019, but with signs pressure on the economy is easing, the RBA decided to keep the cash rate stable.
At its meeting today, the Board decided to leave the cash rate unchanged at 0.75 per cent – https://t.co/gwns9nFNLS
— RBA (@RBAInfo) November 5, 2019
Positive signs for the economy
With a stronger than expected inflation figure of 1.7% for the 12 months to September, the pressure was off to cut interest rates.
“While the inflation rate has now been below the 2-3% target for many years, and obviously still is, it has been seen as some evidence that monetary policy is starting to work as it should,” says chief economist at realestate.com.au, Nerida Conisbee.
Another sign that the economy is reaching a gentle turning point is the unemployment rate, which remained stable in September. Conisbee notes that although this may not be overly positive, it’s better than heading in the wrong direction.
Buyer activity in spring
The three interest rate cuts since June has enticed potential buyers to jump into the property market.
The spring selling season shows that buyers are back, with record visits on the realestate.com.au website in September and October and high clearance rates across the country.
There has also been an easing of home loan lending restrictions by APRA and shopping around for a competitive home loan rate has seen many borrowers benefit.
With property experts predicting the spring selling season continuing up until Christmas, it’s still prime time for buyers to be taking advantage of the record low interest rates when taking out a loan.
Searching for a competitive rate is highly recommended as while the smaller banks have passed on the entire rate cuts to consumers, many of the bigger banks have not passed the cuts on in full.
“The behaviour of the banks in passing on interest rate cuts is problematic – there isn’t much point cutting the cash rate if the benefits are diluted by the time it reaches consumers and businesses,” says Conisbee.
What will the future hold?
With the Christmas season on the horizon, it’s unlikely that another cut will occur at the next meeting in December, so as not to deter consumers.
Conisbee predicts that it’s more likely than not that rates remain on hold until at least February.
“Whether the RBA cuts rates next year, or is even forced to move to quantitative easing, it’s only one way that conditions can be pushed forward,” says Conisbee.
Another cut would bring the cash rate down to a new record low of 0.50%. This combined with state and federal budgets and additional tax cut opportunities, means there could be exciting times ahead for the property market in 2020.