Cash rate stays low for another month

Cash rate stays low for another month

There's good news if you've not yet taken advantage of the cheap home loans available across the nation, as the official cash rate is staying on hold for another month.

The Reserve Bank of Australia (RBA) met on November 4 and decided conditions in the wider economy weren't quite right to warrant a change in the cash rate just yet.

As a result, it'll stay at 2.5 per cent at least until the RBA's next meeting, which is scheduled for December 2.

What's happening in the economy?

The RBA takes both the domestic and global economies into account when making its cash rate decision and its current assessment is that conditions remain mixed.

Although international growth is continuing at a moderate pace, the board explained how commodities are still causing some difficulties for Australia.

This is because prices remain relatively high for some commodities, but there has been weakening among those that the country is most likely to trade in.

Meanwhile, Australia has also seen moderate expansion, even though investment in the resource sector continues to decline and public spending is likely to remain limited.

It's possible the RBA will wait until more positive economic indicators start to emerge before it changes the official cash rate, which many experts believe won't happen until early next year.

Whether it is increased or decreased will largely depend on how well the economy performs over the coming months and if it needs any more changes to monetary policy to succeed.

What are activity levels like among investors?

Strong investment often means that the economy is on a sound footing - and this is certainly the case when it comes to the property market.

The RBA noted how investors are in search of decent returns as interest rates remain low, which may spur them on to think about putting money into real estate.

Responding to the rate announcement, the Housing Industry Association (HIA) pointed out how the conditions are working in favour anyone who wants to enter the property market as a buyer or investor.

"Borrowing costs are set to remain at or close to record lows for some time to come," predicted HIA Chief Economist Harley Dale.

"Super low interest rates have unleashed substantial pent-up demand for new housing to the benefit of many parts of Australia's domestic economy beyond residential construction."

How else has the property industry benefited?

The positive effect of low interest rates on the economy is far-reaching, as the HIA explained how residential construction has been given a much-needed boost over recent months.

However, Dr Dale now believes the "interest rate boost to the new home building sector has almost run its race" and that other stimuli will need to be put in place to ensure this positive run continues.

There are nevertheless several key projects still in the pipeline, so the HIA anticipates construction levels will remain high at least for the near future.

Latest figures from the Australian Bureau of Statistics (ABS) show that some parts of the country experienced a rise in dwelling approvals throughout September.

If you're in search of a home loan for a new property, the Australian Capital Territory could well be the place to look as approvals were up 4 per cent compared to the previous month.

South Australia, Western Australia and Queensland also have some opportunities for investment, as their approval levels increased 1.3 per cent, 0.9 per cent and 0.7 per cent, respectively.

Aside from the rise in construction, the RBA explained how dwelling prices had continued to increase across the nation, which once again reflects the health of the property market as a whole.

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