What the RBA Cash Rate Cut means for home buyers
It’s been one of the biggest financial news-related events of the month, but in case you haven’t heard, here’s a brief recap.
On Tuesday 1st October 2019, The Reserve Bank of Australia announced a cut in the official cash rate. It was slashed by 25 basis points, putting the current cash rate at 0.75 per cent. Although this was the third reduction in our cash rate since May, it marks a new record low for Australia. In fact, this is the first time that our cash rate has ever dropped below 1 per cent.
It was indicated that the reasoning behind the cut was to keep up with global trends, but it was also a response to global economic risks and aims to facilitate economic growth alongside factors such as lower interest rates and recent tax cuts.
It is being speculated that there are more rate cuts to come before Christmas, and as a result, many lenders (including three out of the big four banks) have decided to announce reductions in fixed rate home loans.
Here’s a quick summary of what’s on offer out there:
- NAB: a two year fixed package loan offering an interest rate of 2.98% p.a.
- Commonwealth Bank: two year owner-occupied wealth package with an interest rate of 2.99% p.a.
- ANZ: two year Breakfree residential loan with an interest rate of 2.98% p.a.
Other lenders who have reduced their rates include ING, Beyond Bank, Homestar Finance and Macquarie Bank.
So, now that we’ve got the nitty-gritty details out of the way; what does all of this really mean for those of us looking to purchase a home?
Well, if you’re a first-home buyer, you could benefit from some banks offering you finance with a deposit below 5 per cent. That’s pretty exciting stuff. Even if you aren’t earning as much as you think you need to, or your rental is getting in the way of savings (or, you just have spending issues, we get it), you could now get into your own place even sooner than you thought.
Another benefit is that you, as a consumer, have been put in a great position to bargain with lenders. With so many options, if someone isn’t giving you what you want, you can easily take your business elsewhere. No need to feel like there’s only one way to get things done.
Perhaps the most promising benefit of the interest rate cut is its potential to catalyse an upturn in the property market. When the interest rate is lowered, more and more buyers are inclined to enter the property market. This, in turn, will increase demand, which increases overall property value as more homes are purchased and availability begins to decline.
Which, of course, means that an investment in property is likely to offer better returns than historically. All the more reason to buy or build in the coming months.
This all comes as very welcome news, and Ross North Homes are excited to be able to provide assistance to everyone looking to build a home.