RBA holds rates at 2% for fifth month

RBA holds rates at 2% for fifth month
RBA holds rates at 2% for fifth month

The Reserve Bank of Australia (RBA) has kept the official cash rate at 2%, for the fifth month. The meeting noted regulatory measures are helping to contain risks that may arise from the housing market. 

CoreLogic RP Data head of research Tim Lawless said the flat rate of growth across the Sydney housing market last month, together with a slowdown in investment related mortgage activity wasn’t enough to sway the RBA into another interest rate cut this month. 

"We saw the rate of capital gain flatten out across the Sydney housing market during September, however the trend rate of growth remains very strong, with Sydney values almost 17% higher over the past twelve months and 4.6% higher over the September quarter," he said.

"In contrast, Australia’s second largest housing market has gathered some momentum over the past quarter, outperforming Sydney with a 2.4% rise in dwelling values last month and a 7.4% shift over the quarter. Other housing market data is suggesting that conditions may be slowing, with clearance rates reducing to the low 70% range in both Sydney and Melbourne on higher volumes and the number of homes available for sale rising higher than a year ago, providing prospective buyers with more options and less urgency in their decision making. 

"With the Aussie dollar holding around the US$0.71 mark, inflation remaining low and labour market conditions relatively steady, the RBA is in a good position to keep interest rates at their record lows.

"The slower capital gain conditions in Sydney may give the RBA some flexibility when considering future interest rate movements, however if the Melbourne market continues to gather pace as Sydney slows down, the effects of slower conditions in Sydney may not be seen in the headline readings for housing market performance. 

"With interest rates remaining on hold, borrowers are still enjoying historically low mortgage rates which should continue to drive demand for housing."

 

Laing+Simmons managing director Leanne Pilkington supported the RBA’s decision to leave interest rates on hold as the wider market undergoes several key shifts heading towards summer.

 

“By maintaining the low interest rate environment for the foreseeable future, the Reserve Bank is providing stability to a real estate market that is otherwise undergoing a significant transition at the moment,” Ms Pilkington said.

 

“Firstly – and at long last – we are beginning to see new stock come online and present some more options for buyers. This is the result of a combination of factors, including a new wave of development bringing new supply as well as the spring selling season playing out.

 

“As a consequence auction clearance rates have been lower in recent weeks, albeit from an extremely high base, as buyers exercise the discretion that comes with more alternatives.

 

“Nevertheless, warnings about auction bloodbaths and plummeting prices remain the domain of doomsayers as opposed to actual experts in the market."

Michael Crawford

Michael Crawford

Michael is the real estate reporter for western Sydney and loves writing about homes and the people who live in them. A former production editor and news journalist, he enjoys writing about real-world property purchases as well as aspirational buys and builds. Following a recent move from Sydney’s northern beaches, Michael now actually enjoys commuting.

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