Buyers win out in 15-month long cash rate stability

23.10.13After dropping the official cash rate to a record low of 2.5 per cent back in August 2013, the Reserve Bank of Australia (RBA) has kept it at this level for the 14 months that followed, with home buyers due to profit most.

In a move that surprised few market analysts, the RBA board met on October 7 and decided that continued low interest rates would be the most prudent monetary policy going forward. It is now the lengthiest period of cash rate stability in 10 years.

“Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time,” RBA Governor Glenn Stevens said in an October 7 statement..

Industry insiders were positive about what the move would mean for the housing market going forward.

“The era of very low interest rates has provided a welcome boost to new home building, and is doing something to alleviate the shortage of dwelling accommodation suffered by Australia,” Housing Industry Association Senior Economist Shane Garrett said in a release from the same day.

“Low interest rates have been important in delivering higher rates of new home building.”

Sam White, chairman of Loan Market, also stressed that continued low interest rates offered a number of advantages for home buyers. For one, with springtime traditionally being a time of intense competition between lenders, home buyers would no doubt find it easier to secure favourable terms and conditions on the home loan products on offer.

Mr White also suggested that buyers make the most of the current circumstances and pay down as much of their debt as possible, or fix the rate on their home loan.

Buyers will likely  still have plenty of time to do so. According to Mr Garrett, interest rates will likely not change until some time in 2015.

Low interest rates have given a boost to housing affordability over the last year or so, resulting in greater demand for housing, which has in turn stimulated more dwelling construction. If these conditions continue, buyers may find it easier to find real estate of their own, particularly in a high-demand market like Sydney’s.

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