In July 2019, the Reserve Bank of Australia (RBA) cut the cash rate from 1.25% to 1%: a new record low. This comes on the heels of the prior month’s rate cut, from 1.5% to 1.25%.
These rate cuts are meant to stimulate the economy and the housing market, making borrowing money more affordable.
Many lenders are cutting their own interest rates to pass on these savings to new and existing customers, which is likely to have a significant impact on the housing market. Here’s an overview of the changes that homebuyers can expect to see coming.
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As the RBA lowers the cash rate, lenders are going to be passing on the savings to customers. These savings can be significant in terms of home loans: even a fraction of a percentage can often mean a much more affordable monthly repayment.
Since lenders have already lowered interest rates in June 2019, these interest rates are declining very fast. In terms of interest, it’s never been a better time to purchase or refinance a property.
Interest rate decreases are generally meant to stave off the effects of property value increases. In Australia, property values have been going up for some time, making it more difficult for first-time buyers to get into the market.
By decreasing interest rates, the government is able to encourage homeownership, without encouraging homebuyers to purchase more than they can necessarily afford.
As always, those looking for a loan should speak to a broker whom deals with multiple banks. Interest rates are negotiable, and this is the best way to get a good deal.
Examples of these interest rate cuts are as follows:
Source: Australian Finance Group
These are not the only banks that are going to be cutting interest rates. Many other banks are following suit, with similar rate cuts. Most banks are cutting rates by about 25 basis points, with some cutting rates by higher or lower. And, most banks had already cut their interest rates in June.
With lending cheap and the Coalition in charge, borrowing has improved for many buyers.
With a rate cut in July following a rate cut in June, interest rates are now at their most favourable.
Buyers who are interested in getting into the market should consider getting in now, especially with a number of other beneficial changes being made in the market.
It’s becoming easier for homebuyers to purchase homes (especially first-time homebuyers), and these interest rate cuts are increasing affordability for both owner-occupants and investors.
With rate cuts, along with the government’s new deposit scheme and loosening home loan rules, this will introduce more first-time buyers into the market than ever. Historically, this has usually led to lower-priced homes going up in value as they become more sought after.
Whether you’re an investor, a first-time homebuyer, or anything in between, the market is changing very quickly. So follow the latest industry updates by subscribing to the Shore Financial newsletter at the bottom of this page.
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Disclaimer: This is general information only and should not be taken as financial advice. Please speak to a Shore financial planning professional before making a decision on your home loan.
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