With the US economy and commodity prices impacting on the Australian dollar and RBA warnings about an over heated capital city real estate market, the recent cut in the cash rate to 2.25% caught some by surprise. In the RBA February meeting minutes, it appears to have been a line ball decision. That, some say, leaves the door open for even further cuts.
The RBA said “It would be important to assess the effects of the measures designed to reinforce sound residential mortgage lending practices announced the Australian Prudential Regulation Authority (APRA) in December”.
APRA is keeping a close eye on lenders after a 2014 end of year surge in loans. The Australian Bureau of Statistics (ABS) lending figures for December show a marked increase in lending with a 4.1% increase in owner occupier refinanced loans, a 3.6% increase in owner occupier news loans and a 6.0% increase in investor loans.
Alan Madden from Mortgage Choice says the local market is already feeling the effects of the rate cut. “The recent rate cuts by the Reserve Bank to its lowest level in recent history, has seen a spike in loan applications from people entering the local market”.
And it’s not just buyers who are motivated by the low rates. Alan says local homeowners with a mortgage “are increasingly looking to fix their interest rate longer term to take full advantage of the low rates on offer”.
The Commonwealth Bank, Westpac and a number of other lenders have passed on the cut in full (and more, in Westpac’s case) and with no sign of a rates rise on the horizon, right now is the cheapest time in decades to get into the local real estate market.