The decision by the Reserve Bank to cut the official cash rate by 25 basis points to a historic low of 1% will create spring-like conditions for property markets across Australia, according to Angus Raine, Executive Chairman, Raine & Horne.
“We saw a pickup in online enquiries and groups at Saturday open homes of between 15-30% in markets across the major capital cities as consequence of the Federal election result in the middle of May and the June rate cut,” Angus said.
“The latest rate cut will prove to be excellent news for vendors as we will see even more people kicking the tyres at open homes from this weekend in many of our capital cities and major regional growth hubs.
“With home loans available offering variable interest rates under 3% according to industry research, Angus predicts the decision by the central bank to loosen monetary policy will “create artificial spring-market selling conditions especially in Sydney and Melbourne, which have already started to rebound with some growth in values in June.”
Reserve Bank Governor Philip Lowe, concurred in his statement supporting the rate cut, stating that: “Conditions in most housing markets remain soft, although there are some tentative signs that prices are now stabilising in Sydney and Melbourne.”
The RBA governor also admitted growth in housing credit has stabilised and with mortgage rates at record lows, “there is strong competition for borrowers of high credit quality.”
In other words, the onus is squarely on the lenders to pass on the rate cut in full, Angus cautioned. “If your lender hasn’t passed on the rate cut in full, it’s time to look elsewhere with the help of a mortgage broker such as Our Broker.”
If the banks pass on the July cut in full, it will translate into savings of $58 a month, that’s $692 a year for the average mortgage holder, according to research from RateCity. Moreover, if the average mortgage holder is lucky enough to get a 0.50% cut over June and July, they will save up to $116 a month or $1,389 a year.
Adrian Kelly, President of the Real Estate Institute of Australia, said first home buyers would benefit most with the number of first home buyers decreasing nationally to 8,010 in April with the average for the first four months of 2019 being 8,319, down by 1,100 per month compared to the last four months of 2018.