Rate cut still needed to help borrowers, says REIA

The Real Estate Institute of Australia (REIA) has expressed disappointment at the decision by the Reserve Bank to leave interest rates on hold today.

“A rate cut would have assisted those struggling with a mortgage and would have also been the catalyst needed to encourage first home buyers into the market,” says REIA president Pamela Bennett.

“Although a number of publications have reported an ongoing improvement in housing affordability over the past twelve months, the change we are seeing is not significant and rates are an important component in the level of housing affordability.

“REIA will release the Deposit Power Housing Affordability Report tomorrow and we are not expecting to see a considerable change in housing affordability which highlights the need for further rate cuts,” says Bennett.

RP Data’s residential research director Tim Lawless says capital city home values were down just 0.2% over the three months leading up to today’s interest rate decision; “virtually a flat housing market and the smallest quarterly decline in home values since March last year”. 

“A return to stability in the housing market is precisely the outcome the RBA have been aiming for with respect to housing market conditions. 

“The full impact of the rate cuts from November and December last year is yet to be seen, however to date there has seen a subtle improvement in transaction numbers prior to the Christmas slow down,” he says. 

“Based on the recent data flows it is becoming increasingly clear that the housing market is likely to be less of a concern to the RBA. 

“Housing finance data from the ABS has also been trending upwards, suggesting we are likely to see the number of home sales continue to show modest increases over the coming months,” Lawless says. 

“Mortgage arrears appear to be in check, home values are stabilising and transaction volumes are starting to tick up. 

“Any future downwards movement in the cash rate is likely to be more reflective of ongoing global uncertainty rather than a response to a further slowdown in housing market conditions. 

“In fact, we believe that the RBA is likely to be quite comfortable with the current state of Australian housing market but will continue to closely monitoring conditions over the coming months to measure the ongoing effect of the interest rate environment on borrowing and value movements,” he says. 

RateCity.com.au CEO Damian Smith says borrowers should budget for further independent rate increases from lenders. 

“Forty-five lenders hiked their variable home loan rates by an average of 12 basis points despite the Reserve Bank keeping the cash rate on hold last month,” says Smith. 

“The rates that borrowers pay have been creeping away from the Reserve Bank’s cash rate movements since the global financial crisis. 

“Last month proves that all variable rate mortgage holders are vulnerable to rate hikes, regardless of what the RBA does,” he says. 

RateCity’s first-home buyers index, released just prior to today’s RBA’s board meeting, found that while the total number of first-home buyers last year was well below the average for the past decade, the proportion of first-home buyers hasn’t been this high for almost two years.