What the rate slash means for homeowners
The Sunday Times
In what was the first rate change since August 2016, the cash rate fell from 1.5 per cent to 1.25 per cent. REIWA president Damian Collins said the cut could assist in reducing financial pressures for those who were trying to enter the property market and also current homeowners.
“By banks passing the full cut on to their customer’s home loans, borrowers can expect for each $100,000 borrowed, annual payments will decrease by $250, making it more affordable to hold on to properties,” he said.
“For current homeowners this will help people stay on top of mortgage repayments and lower cash-out-of-pocket expenses, which will mean more money to spend in other areas that will help boost the economy, or pay down existing debt.”
ABN Group managing director Dale Alcock echoed the positive sentiment, saying the cut would provide potential homebuyers with confidence.
“These lending conditions will significantly increase the borrowing capacity of homebuyers who are in the position to purchase a home,” he said.
“It will give homebuyers the much-needed break they have been waiting for to leap into the housing market.
Many more Australians who have been ready to buy a new home will now be able to secure the dream of homeownership.”
Urban Development Institute of Australia (UDIA WA) CEO Tanya Steinbeck said WA was on the edge of a property market recovery and there needed to be collaboration between the various stakeholders.
“One of the biggest contributors to the continued market downturn in WA has been the excessively tightlending criteria that banks are insisting home loan applications meet,” she said.
“We can only hope if the banks pass on this official cash rate cut, in combination with the potential for loosened mortgage rules flagged last month, we will see more positive movement in terms of demand for property as consumer confidence is bolstered.”
Mr Collins said there had already been an evident increase in sales activity since the election, with a markup of 14 per cent. It is a move away from the 19.7 per cent national decrease in first homebuyers, which was recorded for the first quarter of this year.
“The RBA cuts, as well as the proposed APRA changes to servicing rates, the Federal Government’s proposed First Home Loan Deposit Scheme and recent Keystart changes will all make it easier for first homebuyers to get into the market,” he said.
“With more Western Australians able to access home loans, property investment and homeownership will become more affordable, which should help stimulate our local property market.”
Mortgage Choice chief executive officer Susan Mitchell said while the RBA outlined leaving the policy unchanged during 2018, which allowed for sustainable economic growth, meeting an inflation target of two to three per cent, there was a change of heart this year.
“A weakened housing market, consistently lacklustre inflation and mixed messages from the labour market may have encouraged the board to shift its long-held stance on monetary policy,” she said.
“In the minutes of the May Monetary Policy meeting, the RBA board said if labour market conditions deteriorated, the bank would be inclined to lower the cash rate.
“Given the nation’s unemployment rate and underemployment rate rose month-on-month to 5.2 per cent and 8.5 per cent respectively, the RBA board may have been pressured into lowering the cash rate in order to help stimulate the economy.”
Ms Mitchell said a second rate cut had been predicted by financial markets for this year. Three rate cuts were predicted by Christmas by some economists.
“Regardless of what the RBA has in store, I urge anyone looking to secure a home loan to speak to their local mortgage broker to ensure they are getting a good deal,” she said.