Official cash rate at a new historical low
In positive news for the real estate sector in country, the official cash rate has been slashed for the second time this year to bring it to a new historical low.
This reduction has now led the rate to sit at 2.5 per cent, after experiencing a 25 basis point drop.
After banks and mortgage lenders pass on the cut, current homeowners can enjoy making smaller repayments to their home loans for residential properties, relieving some financial pressures that some people across the country have been feeling.
Furthermore, it gives many investors and first home buyers the opportunity to enter the residential property market, helping to restore consumer confidence levels.
The decision was made by the Reserve Bank of Australia (RBA) at its monthly meeting yesterday (August 6), with governor Glenn Stevens citing economic growth and rising unemployment numbers as being some of the main contributors.
"In Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher," said Mr Stevens in an August 6 statement.
This latest easing of monetary policy has been welcomed by the Real Estate Institute of Australia; with the president of the institute Peter Bushby stating that it will improve the level of housing affordability across the country.
"If the banks pass it on in full, the average loan repayment would be reduced from $2,106 to $2,006, or by $100 per month," he said.
At the same time, average loan payments would also decrease, resulting in savings for many current home owners.
"Housing affordability would improve by 4.7 per cent with the proportion of the median family income to meet average loan repayments decreasing from 29.9 per cent to 28.5 per cent."
However, Mr Bushby has stated that more needs to be done to assist first home buyers in order to bring them back into the market.
Changes to many state government-provided first home buyer incentives have left many to place their home-buying plans on hold.
Mr Bushby said that despite this latest rate cut, switching incentives to include the purchase of brand new properties only has meant that "entering the market is still tough" for many new market entrants.
"With the proportion of first home buyers remaining consistently below the long term average, this needs to be a high priority issue for both major parties as we approach the federal election," he concluded.