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C&G’s Guide to the March RBA Announcement
It’s that time again! The Reserve Bank of Australia met for their monthly board meeting on Tuesday 6 March, and in today’s blog, C&G unpack the cash rate decision and its implications for the economy.
For the 19th consecutive month, the RBA has left the cash rate to sit at an all-time-low of 1.5%. Since the last national cash rate drop from 1.75% back in August of 2016, Australians have been enjoying historically low interest rates. Governor Philip Lowe’s decision to hold the cash rate steady for another month is influenced in part by poor wage growth, and high levels of household debt.
Low interest rates have added fuel to the fire that is demand in the property market – as low rates mean low(er) mortgage repayments, which have enhanced the buying power of many. Accompanying high levels of household debt due to the additional spending power enabled by low interest rates are a matter of some concern for the RBA. Whilst lifting rates could cool demand in the property market, doing so might have a negative impact on existing homeowners who have stretched themselves to acquire property. Recent property data has shown a natural cooling in capital city buyer demand – namely in some pockets of Sydney and Melbourne – supporting the board’s decision to keep rates on hold.
The RBA’s main attentions have focused on consistently low inflation rates, and a slight lift in unemployment rates throughout 2017. While the national cash rate will eventually need to rise, current conditions are not indicative of an increase in the short-term.
Expert pundits suggest that the best course of action for property owners (or would-be buyers) is to take advantage of today’s low rates and pay down as much principal as possible. It’s also wise to consider your financial situation, and carefully assess your capacity to repay your loan when rates do rise. Calculate what your repayments might be if rates rose to 8%, and work backwards to see what budgetary changes you might need to make to keep up. Your broker or lender will assist you to lock in a low rate, make additional repayments or use an offset facility - so take advantage of their knowledge.
Chisholm & Gamon continue to support our valued buyers and vendors in their property endeavors. With a robust market in place across the Bayside region, 2018 remains a stellar time to up your property game - so get in touch with C&G.