Interest rate stability approaches record as cash rate sits

Mortgages-should-stay-more-affordable-with-the-RBAs-cash-rate-decision_157_88352_0_14077038_300Australia is on its way to its longest period of interest rate stability in recent history thanks to the Reserve Bank of Australia’s (RBA) latest cash rate decision.

Meeting on November 4, the board elected for what is now the 14th┬áconsecutive month to keep the official cash rate held at the historically low rate of 2.5 per cent. Buyers were no doubt pleased to hear RBA Governor Glenn Stevens’ words that, for the near future, “the most prudent course is likely to be a period of stability in interest rates”.

The RBA’s decision bucks the recent trend of budging the cash rate on┬áMelbourne Cup day. Over the past two decades, the RBA has changed the cash rate nine times on this day, and six of these were during the last 10 years.

There were a variety of reasons for the unchanged cash rate, including an underperforming economy, an inflated Aussie dollar, a good level of inflation and continued high unemployment. In any case, buyers will continue to benefit from the resulting low interest rates.

“Borrowing costs are set to remain at or close to record lows for some time to come,” said Housing Industry Association┬áChief Economist Harley Dale in a November 4 release.

“Super low interest rates have unleashed substantial pent-up demand for new housing to the benefit of many parts of Australia’s domestic economy beyond residential construction.”

Mr Dale went on to note that there was a healthy level of new home construction still in the pipeline. Buyers would therefore not only see an improvement in terms of housing affordability, but the amount of supply that was out there.

Even if the cash rate does rise sometime in the near future, a survey of 33 leading property experts and economists found most don’t believe it will climb to the high levels that it has in years gone by. Buyers have therefore got plenty to celebrate for a while yet.

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