Two more rates cuts before any major residential price acceleration: Cameron Kusher

The last time we saw mortgage rates this low was in 2009 and prior to that it was a brief period in 2001 and in 1970.

RP Data confirms that it has been more than 50 years since official interest rates have been this low and subsequently, the cost of borrowings, particularly for housing, is at some of the lowest levels seen over this time.

The standard variable mortgage rate is currently recorded at 6.2% and is much lower than the 20 year average of 7.6%.

Outside of a brief period in late 2008/early 2009, the current average standard variable mortgage rate is at its lowest levels since late 2001.

Discounted variable mortgage rates have been introduced over recent years and the vast majority of mortgagees receive these mortgage rates on their home loan which means that many variable home loans are now available at an interest rates below 5.5% with the big four banks advertising average rates of 5.4%.

With mortgage interest rates so low, it is no surprise that there has been a ramp-up in housing finance commitments, albeit from historically low levels throughout 2013, and a subsequent rise in transaction activity.

Another feature of the current market is that the less popular three year fixed mortgage rates are available at a particularly low interest rate. The average three year fixed mortgage rate was recorded at 5.15% at the end of June 2013.

It seems more likely they will fall rather than rise over the short-term.

Of course, the vast majority of mortgagees continue to choose variable mortgages which have a higher interest rate - it is interesting to note the rising prominence of fixed rate mortgages.

 A number of lenders are currently offering fixed rate products at less than 5%.

I expect that the housing market is likely to continue on its current trajectory of moderate value increases.

In fact, should the two additional cuts to interest rates come to fruition, value growth may start to accelerate.

Lower interest rates and the subsequent lower mortgage rates are undoubtedly providing an impetus for greater housing market activity.

The key challenge will be maintaining this higher level of housing activity as the unemployment rate nudges higher, commodity prices head lower and with slower economic growth.

As a result, the markets more closely linked to the resources sector such as Perth and Darwin may record lower levels of value and rental growth whereas those such as Brisbane and Adelaide that have recorded a sustained period of under performance may start to pick-up as they start to look relatively more affordable, particularly compared to Sydney, Melbourne and Perth where value growth is currently much stronger.

Cameron Kusher is senior research analyst at RP Data.