Mortgage brokers in Rockingham and across Australia got good news as the RBA decided to keep the interest rate at its record low of 2.5% for the 14th straight month.
The biggest issue that made the Board keep the interest rate low is consumer confidence. They cited the Westpac Melbourne Institute of Consumer Sentiment, which said that consumer confidence was down 4.6% in September. According to at least one attendee, consumer sentiment was the reason the Board decided to leave the rate at 2.5%.
Consumer confidence is such an important issue that it is currently outweighing the housing market. Since the original reason for lowering rates was to stimulate the market, this is an indication of how important the consumer confidence issue is to the Board.
Another reason for keeping the rate low: housing prices only rose 0.1% across Australia for September. This is a negligible rise and September is seen as a “flat month.”
Housing prices are still 9.3% higher than at this time last year, giving hope to those who are already homeowners. Every capital city recorded some growth during the last year. Auction clearance rates, another important indication of the market, remained strong at 70%.
The Australian economy is showing signs of being on the rise. The dollar has gone down significantly in the last two months. That doesn’t sound good but it is great for Australia’s ability to compete on the international stage. It is especially good news for industries such as the resource industry, who thrive when our dollar is low because it means that our prices are lower relative to the currency rates of other countries.
What This All Means to You
There are a number of good “takeaways” from this news. When you connect all of the dots, it bodes well for the property market. It also means that now is a great opportunity to enter the housing market or the investment property market before prices start to rise.
The entire reason for lowering interest rates is to stimulate the housing market. In addition, the First Home Owner Grant (FHOG) was increased to $10,000 on new homes. This was done to stimulate new home construction. This creates jobs and further helps the economy. The RBA and the Government are working together to ensure the health of the housing market.
With the 9.3% increase in housing prices from last year, it is obvious that the lowered interest rates have done their job. While many still find it difficult to afford entry into the housing market and others find it difficult to become property investors, low interest rates are making homes as affordable as they are ever going to be.
When the interest rate first reached its low of 2.5%, we stated that it was the best opportunity one would ever have to buy a home and see capital gains. Someone who bought a Rockingham home at the median price of $405,000 at this time last year would have seen a capital gain of $34,000 in home equity by the same time this year.
Although the Global Financial Crisis (GFC) resulted in a lot of property prices going down, they have since rebounded to a record high.
Consequently, at any time in history, one can say “you are never going to see lower prices than right now” and have a very good chance of being correct. We see the market remaining stable for a few months but beginning to rise again by the middle of 2015. Since interest rates are at an all-time low, it can be stated with certainty that they will eventually rise again.
For a home loan pre-approval, call Smartline Rockingham. Don’t wait another year or you will be disappointed. Call (08) 9527 1800.