Unclear how very little turnover will affect residential property prices: RBA

The recent economic contraction, uncertainty and social distancing measures were likely to result in very little turnover in the housing market, according to the latest RBA minutes.

"It remained unclear how this would affect residential property prices," the board advised.

Most households with mortgages had significant buffers of accumulated prepayments, with around half of these loans having prepayments that exceeded six months of payments, it noted.

The share of mortgages that may not have a buffer of liquid assets was around 15 per cent.

Measures of household financial stress had been at relatively low levels prior to the COVID-19 outbreak, the latest board minutes had noted.

Members were informed that, at the time of the April meeting, banks had reported that around 5 per cent of households had enquired about deferring mortgage repayments.

It noted that the risks from residential property markets had diminished over the course of the preceding year as increases in housing prices in Sydney and Melbourne had led to a reduction in the share of households at risk of having negative equity on their housing assets.

Nationally, around 3 per cent of mortgages had negative equity positions, with most of these in Western Australia.

The bank noted for households, a large proportion of the monetary policy easing since May 2019 had flowed through to mortgage rates paid.

Lenders had reduced their interest rates on variable rate housing loans by 25 basis points following the reduction in the cash rate on 3 March.

"While most lenders did not reduce their standard variable rates following the further cut in the cash rate on 19 March, they had announced a reduction for interest rates on fixed rate loans and measures to defer interest and loan payments for distressed households," the minutes noted.