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Cash rate stays on hold in June

Cash rate stays on hold in June

By Rich Harvey, CEO, propertybuyer.com.au

Based on the past year, a betting man would likely predict the Reserve Bank of Australia (RBA) to keep the official cash rate unchanged, and he'd be right. The majority of economists expect that rates will remain on hold until the first or second quarter of 2015.

RBA Governor Glenn Stevens once again addressed an eager contingent of prospective home loan borrowers and housing industry professionals to tell them today's low interest rate environment is set to continue for at least one more month.

"In the board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates," Mr Stevens said in his latest statement regarding the RBA's monetary policy.

Housing Industry Association Chief Economist Dr Harley Dale is hopeful this latest decision will put to rest some of the speculation regarding when interest rates will rise.

"Today's interest rate statement hopefully reduces the recent elevated level of conjecture, and therefore uncertainty, regarding the direction and timing of the next interest rate move," he said.

"This uncertainty is itself unhelpful for the sustainability of a residential construction recovery."

While conjecture and uncertainty are not helpful, continued low interest rates certainly bring greater stability to the property market. Home buyers across the country have entered the market with confidence thanks to affordable mortgages obtained with record-low interest rates.

With the cash rate staying put at 2.5 per cent, it's likely this strong activity will continue. However, the recent tough budget measures introduced by the Federal Government have put a dent in consumer confidence. We are now seeing some cooling in the housing market - which is a good thing. Prices are not likely to drop, however the pace of growth slowed considerably in May.

Along with continued demand for property will likely come further increasing home prices, something house hunters will want to keep in mind.

Whether you're trying to buy a first home, upgrade to your next home or buy a luxury penthouse, chances are you don't want to pay too much. Fortunately, a qualified buyers agent can help you get the jump on your competition and negotiate a fair price with vendors.

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