Official cash rate retained at 2.5 per cent

2.10.13bAustralia’s official cash rate has a number of different effects on the nation’s economy, with one main influence being on home loans and the interest rates buyers can secure from lenders.

The cash rate has been steadily declining since 2011, dropping 2.25 percentage points to a historically low 2.5 per cent back in August.

Yesterday (October 1), the Reserve Bank of Australia (RBA) announced their decision to retain the cash rate at this level, which could be great news for anyone interested in purchasing property in Australia.

In a statement, Governor of the RBA Glenn Stevens stated the choice was made in order to sustain interest-sensitive borrowing across the nation, which encompasses home loans and their affordability to Australians.

This news has been received well by many housing industry organisations, including the Real Estate Institute of Australia (REIA). Speaking on behalf of the organisation, Chief Executive Officer Amanda Lynch said housing affordability has increased for Australians following the cuts.

The average home loan repayment amount can now be met with just 28.7 per cent of the median family income, making the prospect of homeownership a reality for many in the country.

“We believe that maintaining the banks’ high lending standards is crucial to ensure
continued sustainable growth in the Australian housing market,” said Ms Lynch in an October 1 statement.

These increasing levels of affordability are providing renewed confidence in the market for many first home buyers, as well as those looking to construct their own family home in the future.

An increasing strength in the real estate industry could be good for a number of reasons, ranging from housing the population through to stimulating the economy through the creation of construction jobs and more.

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