The Reserve Bank of Australia’s (RBA) decision to cut the country’s official cash rate from 0.25% to a historic low of 0.10% has been welcomed by figures across the property sector.
Philip Lowe, governor of the RBA, announced the rate cut on Tuesday with an eye towards managing the unemployment rate and supporting economic growth as the country deals with its first recession in almost 30 years.
Adrian Kelly, president of the Real Estate Institute of Australia (REIA), said that the decision will “definitely benefit home buyers.”
“Today’s interest rate cut, if passed on, would see the proportion of income required to meet loaner payments decreasing to 33.9%,” he said. “Yesterday’s housing finance data showed that September recorded the fourth consecutive monthly increase and the highest level since October 2009 on the back of improving consumer sentiment about purchasing a home, particularly amongst first home buyers. Today’s interest rate cut will add to buyer interest.”
Kelly’s sentiment was echoed by Tim McKibbin, chief executive officer of the Real Estate Institute of New South Wales (REINSW). According to McKibbin the current low interest rate environment is supporting “robust buyer demand” and that the RBA’s decision to lower the official cash rate even further is “good news for existing mortgage holders and those looking to purchase property, including first home buyers.”
“Some major lenders pre-empted the RBA’s latest cut by reducing their own rates in recent weeks, and the market is hopeful all major lenders will follow suit,” said McKibbin. “Low interest rates will play a key role in our economic recovery.”
Meanwhile, Peter Martin, a visiting fellow at the Crawford School of Public Policy at the Australian National University, wrote in The Conversation that the RBA’s announcement could mean “low rates for a long, long time.”
“Australia’s inflation rate hasn’t been sustainably between 2% and 3% for more than half a decade, and it is likely to be at least that long again until it gets back there, if ever,” Martin wrote in The Conversation. “By tying the future of the cash rate to an actual inflation rate rather than a feeling about the inflation rate, Governor Lowe is tying the bank to a cash rate of close to zero for as far anyone can see. It means that not only will it be as cheap as it has ever been to borrow (for a mortgage, a business, for anything), it means there’s no risk of that suddenly changing because the bank gets rush of blood to the head.”
