Mortgage brokers in Rockingham, Kwinana and across Australia are excited about the news that the Reserve Bank of Australia (RBA) cash interest rate has dropped yet again, to a record low 2.25%. Let’s take a look at the reasoning behind the further rate drops and what it means to the Perth housing market.

The Reasons Behind the Rate Drop

RBA Governor Glenn Stevens covered a wide range of economic events in his statement concerning the monetary policy decision. The global economy grew in 2014, but at what he termed a “moderate pace.” The Chinese and US economies grew as expected while the Japanese and European economies failed to perform as expected. More growth, albeit at a moderate pace, is projected for 2015.

Commodity prices continue to decline, with more movement in the “past few months.” Mr Stevens attributed this to a combination of greater supply and lower demand. Mr Stevens projects that lower energy prices will lower CPI inflation rates while strengthening global output. Globally, many major sovereigns have seen their interest rates also drop to all time lows in recent months. This has produced a situation in which credit costs are low across the globe.

Australia’s economy is growing at a rate slower than the RBA would prefer. Oil and energy prices are down while unemployment is up. Inflation is at 2.25%, which is “on target” according to Mr Stevens. The Australian dollar is declining against the US dollar but not as much against other currencies. Mr Stevens would like to see the dollar decline further to stimulate economic growth.

What it Means to You

Those who can afford to buy a home are in a perfect position to take advantage of low interest rates and a housing market that is rising, but at a slow rate. Whether you are looking at an investment property, a first home or an upgrade, every month that you delay is going to cost you money.

Call (08) 9527 1800 to learn more.