Interest rates put spring in the housing market’s step

Low-interest-rates-are-bolstering-the-housing-market-_157_6006289_0_14101765_300The Reserve Bank’s decision to trim the official cash rate down by 25 basis points in February was met with a round of applause in February, but there were some questions surrounding their most recent move. Keeping the cash rate steady at 2.25 per cent was not roundly welcomed, with many industry commentators pointing out that mortgage holders would relish a further reprieve.

However, recent research from CoreLogic RP Data shows that households are already reaping the benefits of historic low interest rates – which is breathing life into the housing market.

Weekly savings

CoreLogic figures show that the average mortgage holder has benefited greatly since interest rates started tumbling back in 2011. Back when the discounted variable mortgage rate was at 6.8 per cent, a $400,000 loan would accrue around $27,200 in interest a year. Come March this year, households have seen a sizeable improvement. The average discounted variable rate now sits at 4.9 per cent as of March, meaning that loan holders save around $7,800 a year on interest payments – $150 a week, according to CoreLogic calculations.

These savings have translated into an increasingly buoyant housing market. Auction clearance rates for the past month or might indicate that consumers have relished the cuts, which is great news for those selling their property. Last week the clearance rate hit above 70 per cent for the fourth week in a row according to Robert Larocca, housing market specialist at CoreLogic.

Sydney was once again a big driver of these results – in the week ending March 8, auctions in the Harbour City reached a preliminary clearance rate of 83.3 per cent, hot on the heels of a 81.4 per cent rate in the previous week. CoreLogic expects this trend to continue in coming months.

“This indicates an auction market is strongly tilted in the favour of sellers,” Mr Larocca said.

Approval numbers soar

Interest rates have not only invigorated auctions and vendors, but the construction industry is seeing a rising number of new builds in the pipeline. Though ahead of the February rate cut, Australian Bureau of Statistics building approval figures for January show that new builds are continuing to garner the favour of home buyers and mortgage holders throughout New South Wales.

The number of new homes approved in January rose 4.3 per cent off the back of increases over the past five continuous months, which could help ease buyers’ pricing concerns. Similarly, the number of new dwellings sold in New South Wales has skyrocketed. This signals that demand for property has far from peaked – a good sign for those looking to sell.

There was some difference in property categories, though, which was obvious all over Australia. New home sales data from the Housing Industry Association (HIA) showed a 9.9 per cent rise in multi-unit dwelling sales in January, but only a 0.1 rise in detached homes.

All in all, interest rates have provided a welcome boost for the housing industry and kept up health demand for NSW property. This could benefit your sale, but  local real estate agent can advise you on a suitable course of action.

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