What Does The RBA Cash Rate Cut Mean For the Queensland Property Market?
Stealing the limelight from the race that stops the nation, yesterday the Reserve Bank of Australia (RBA) cut the cash rate to a historic new low of 0.10 per cent.
The cash rate cut is a welcome attribution to the post-pandemic economic recovery. It is expected to support the creation of jobs as well as increase housing demand.
The complete RBA package announced:
- A reduction in the cash rate target to 0.1 per cent;
- A reduction in the target for the yield on the three-year Australian Government bond;
- A reduction in the interest rate on new drawings under the Term Funding Facility to 0.1 per cent;
- A reduction in the interest rate on Exchange Settlement balances to zero; and,
- The purchase of $100 billion of government bonds of maturities of around five to 10 years over the next six months.
What does the RBA cash rate cut mean for Queensland?
Supporting Queensland’s progressive property market, the new package announcement will make it easier for individuals to access home finance.
“Queensland’s affordability and liveability continue to be its greatest assets, as buyer interest continues to increase month on month. It’s very pleasing to see many renters make the transition to homeownership too. With a diverse range of housing options on the market, if you shop around you may actually be better off financially owning a property rather than renting one. With historically low-interest rates and the RBA cutting the official cash rate to 0.1 per cent; it’s never been cheaper to access home finance. Particularly for first home buyers who have the added benefit of a range of government grants to help support them further,” says Antonia Mercorella, Chief Executive Officer at the Real Estate Institute Queensland.
The RBA announcement complements the initiatives from the Federal Budget. Particularly benefitting homeowners and buyers who were previously relying on pandemic financial support.
“The stimulus of such extremely low-interest rates, together with the initiatives announced in the federal budget and state-level incentives like stamp duty concessions and building grants, are likely to be enough to outweigh the headwinds facing the market. Headwinds include the wind-down of fiscal support such as JobKeeper, and the expiry of home loan repayment deferrals, which are moving through their peak period of expiry this month,” says Tim Lawless, Head of Research at CoreLogic.
every dollar counts
The initiatives are expected to be a positive influence on Queensland’s property market. However, the REIQ is urging real estate professionals to encourage buyers, sellers and landlords to ensure that the interest rate cut is wholly passed on by their bank.
“At the moment, the average variable rate is 3.34 per cent p.a. If lenders pass on the 0.1 per cent cut in full, the new average will be 3.19 per cent p.a. This equates to saving $33 a month for an owner-occupier, making principal/interest repayments on an average $400,000 home loan. We certainly encourage homeowners to shop around if their current lender does not pass on the full rate cut. Every dollar counts, particularly during the current pandemic climate,” says Ms. Mercorella.