RBA holds cash rate at 2 per cent for December

The RBA has once again held rates at 2 per cent for December, which according to the REINSW President John Cunningham was largely expected and “This decision adds weight to a good stabilisation of the market into the New Year.”

The cash rate has remained at 2 per cent since May this year when it dropped 25 basis points from 2.25 per cent.

These lower interest rates are helping to support both borrowing and spending, which is particularly useful in the lead up to Christmas. In spite of recent changes to some lending rates for housing which might reduce this support slightly, the overall conditions are favourable.

Over the rent months, credit growth has also increased, whilst growth in the lending to investors in the housing market has started to ease.

Within the housing market, the pace of growth in both Melbourne and Sydney property markets have also moderated in the last few months, whilst has subdued in other cities. Auction clearance rates have dropped, especially in Sydney and the Australian dollar is also adjusting to the significant declines in key commodity prices.

According to CoreLogic RP Data, capital city dwellings over November experienced a fall of 1.5 per cent, whilst over the past three month period, dwelling values have fallen by 0.5 per cent.

"While the cash rate remained on hold, a less buoyant housing market is likely to provide the Reserve Bank with a greater degree of flexibility in adjusting interest rates without as much risk of over stimulating the housing market as what they have faced over previous months”, said Tim Lawless.

"Despite the stable rate setting, mortgage rates remain close to record lows which should continue to act as an incentive for home buyers and investors considering a property purchase," he added.

So what can we expect from 2016? According to mortgage broker John Kolenda, who is also one of iBuyNew’s Non-Executive Directors, the early half of 2016 is likely to see yet another rate cut.

The meeting today also mentioned that the global economy is expanding at a moderate pace, whilst the Asian region experiences some softening conditions; Europe is in recovery whilst the US continues its growth.

Compared to 12 months ago, key commodity prices are also much lower due to increased supply and weaker demand with Australia’s trade falling. This is noticeable in the large decline in capital spending in the mining sector in Australia.
Published on 7th of December 2015 by Marty Stanowich
Marty Stanowich
Marty Stanowich


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