The RBA has announced that it has decided to leave the Cash Rate on hold at 0.75%.

As expected, the Cash Rate was left on hold, particularly with house prices rebounding in the back end of the year. We have had three rate cuts since June, and interest rates are already at an all-time low.

This was the final cash rate decision of the year. The next RBA Board Meeting will be held in February, 2020.

As Samantha Megginson from Your Investment Property Magazine reports…

“Following a reasonably volatile 12 months in terms of property price movements and consumer access to mortgage funding, some sectors of the housing market appear to be responding to an environment of lower interest rates, particularly in Sydney and Melbourne.

In fact, new data from the November CoreLogic Home Value Index data released Monday December 2 highlights the continued, somewhat surprising rebound in residential property price growth in Sydney and Melbourne, with the price index up around 8% in both cities since June 2019.

It’s important to note that sales volumes are still down, and this median price ‘growth’ may be driven in part by more higher-value transactions, as APRA’s lifting of the serviceability cap has increased borrowers’ access to finance this year.”

Back in July, The Australian Prudential Regulation Authority (APRA) announced that it had loosened the serviceability restrictions on home loan mortgage assessments. They no longer expect lenders to assess home loan applications using a minimum interest rate of at least 7 per cent or 7.25 per cent which had been the common industry practice.

Lenders now use a revised interest rate buffer of at least 2.5 per cent over the loan’s interest rate which has generally improved the borrowing capacity for home buyers.

“Looking ahead, if rebounding property prices fail to translate into increased consumer confidence and therefore, rising consumer spending and a growing appetite for investing, then we may see another interest rate cut in February or March 2020.

The case for an interest rate cut in February will depend on housing, construction and economic data released over the next two months. If consumers are buoyed by recent interest rate cuts and this translates to big Christmas spending, it may form part of a fiscal stimulus that gets the economy moving. However, if consumer spending fails to alleviate the Reserve Bank’s pressure to drive the inflation rate up, this could give them cause to reduce the cash rate further next year.” Samantha predicts.

It will be interesting to see what happens with interest rates in the early part of 2020 when the Reserve Bank meet again.

If you have any questions about the current market or acreage market trends, please don’t hesitate to contact me.

Regards

Greg Vincent