Interest Rates: RBA holds interest rates steady for record time

Interest Rates stay as they are as the RBA steers Australia through a turbulent time.

The housing Industry would have breathed a sigh of relief yesterday afternoon as the RBA board decided to leave interest rates unchanged for what is now a record period under RBA Governor, Glenn Stevens.

Arab Nation unrest together with the World coming out of recession have boosted oil prices, and the booming Australian Dollar ,which hit 27 year record highs this week, all added weight to the decision to leave rates as is.

House prices and new home building falls

Other factors that would have played on the minds of RBA board members would have to be the uncertainty in the property market. If you are thinking of building a new home its understandable that these decisions will affect you also.

Home prices are falling in most markets

New home sales are falling and land sales have collapsed in many areas around Australia, with the worst affected in Queensland.

Household savings are up, and that has to be a pleasing sign in the the wake of fuel prices rises, and electricity, gas and water prices hikes.

The RBA can make interest rate decisions that don’t seem to make sense.

The RBA can make some queer decisions though. For instance, the oil prices will add to inflation and therefore the RBA may later use this as the trigger for a rate rise.

Some say that petrol will reach $2.00 this year, so its any ones guess what oil prices would be if the Australian Dollar was as weak as it was five years ago. $3.50 a litre?

Most economists are saying that interest rates won’t increase again till later in the year. House hold savings are on the rise and home prices are moderating in many markets, even where there are housing shortages, so many home buyers are realising that low interest rates are a thing of the past and they should be buying on the basis that the average 8% mortgage rate should be the affordability guide, and they should buy a home based on being able to afford a home mortgage repayments based on that number.

Are Home buyers putting off homeownership till later?

Also a lot of people have started to question the merit of homeownership when they are young, if it means a 30 year commitment of two incomes. Whilst your own home is a great place to raise a family, such a heavy financial burden is seen as too heavy for some.

So I expect to see a lot of people putting off homeownership till they are in their thirties of even forties. Then they may have to look at paying off a home in twenty years or less.

This will be of particular concern mortgage lenders who have new responsible lending laws to contend with on factors such as age. Is it reasonable to assume both couples in a relationship will work through till they are 65? or 60 for women and 65 for men?

First Home builders get older

The aging first home buyers is also a real issue for home builders and land developers because if the average age of the first home buyers goes over 40 years old, and they are not the one’s buying new homes these days, what will be the age of the second and subsequent homebuyers who presently are the ones who build new homes.

How will the new lending laws affect their customers ability to obtain home finance?

But the Australian home buyers and homeowners seemed to have got the message.
Electricity, water and gas, and petrol are all rising, so a cut in discretionary spending was the minimum requirement. The fact that we are seeing rising savings as well bodes well for future interest rate moderation and maybe people are taking a harder look at the real value of real estate?

Search terms for this article:

• interest rates
• interest rates rba