Interest rates hit new record low.

The Reserve Bank of Australia cut interest rates to a record low 1.5%.

Interest rates hit new record lowAt its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.50 per cent - http://www.rba.gov.au

The cut, the second since May, is more about inflation and overall economic activity than housing according to REA Group Chief Economist Nerida Conisbee.

“The annual inflation rate of 1% remains lower than the RBA target of between 2 and 3%,” she says.

“All other major economic indicators are relatively positive – GDP growth is sitting at 3.2% and unemployment at 5.7%.”  

“One major concern continues to be the housing market with a cut likely to continue to fuel increased demand in Melbourne and Sydney, both cities continuing to see strong price growth,” she says.

                                                        

The move could help more Australians enter the property market despite higher prices, according to RateCity‘s data insights director Peter Arnold.

“Today’s cut means we’re now likely to see rates hit new lows of under 3.5 per cent, with rates of 4 per cent becoming the new norm,” he says.

But the lower rate may not be passed on the lenders.

Today’s decision by the (RBA) Board to implement another rate cut in the space of three months means there’s every chance some lenders will opt to keep some of the cut for themselves this time around,” he says.

                                                       

The decision comes as the Housing Industry Association’s home sales data shows that in June 2016 sales of new homes were up by 8.2%.

“The overall trend is still one of modest decline for New Home Sales, but a bounce of 8.2 per cent in June 2016 highlights the resilience of the national new home building sector,” says HIA Chief Economist Dr Harley Dale.

“Comparing the June quarter this year to the same period last year, detached house sales are down very sharply in South Australia (-21.4%) and in Western Australia (-27.5 %), yet sales are up by 17.0% in Victoria and by 7.1% in Queensland. New South Wales rounds off the detached house coverage provided by the New Home Sales report and sales are down by 7.3% on an annual basis.”

Yet the rate of home ownerships is declining in Australia, with the low-interest rate environment benefitting older Australians looking to buy an investment property rather than younger Australians looking to enter the property market.

 

Source: http://www.realestate.com.au/news/interest-rates-hit-new-record-low/

Date: 2nd August 2016

Author: Danielle Cahill

 

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