Home buyers benefit from cash rate decision

Home buyers benefit from cash rate decision

Australians looking to get a leg up on the property ladder will be pleased with the Reserve Bank of Australia's (RBA) latest monetary policy decision.

The RBA elected to maintain the official cash rate (OCR) at 2.5 per cent, marking the 11th consecutive month of this low rate, and continued cheap home loans.

Future growth anticipated

RBA Governor Glenn Stevens noted that while firmer growth was expected in Australia in the beginning of the year, what transpired was "very strong increases in resource exports".

"Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way," Mr Stevens explained in a July 1 statement.

While resource exports have performed well, they are set for a significant decline. An active residential construction market may help buoy economic conditions in the months and years to come, and could also alleviate housing demand.

For many buyers, low interest rates have been a blessing and a burden. There is an extensive selection of affordable home mortgage products available to borrowers, however an influx of interest in markets such as Sydney and Perth has seen dwelling prices rise significantly during 2013.

"In the board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target," Mr Stevens stated.

"On present indications, the most prudent course is likely to be a period of stability in interest rates."

However, not everyone agrees with the decision.

"[W]ith household spending slowing and Chinese authorities looking to ease excess capacity in their steel sector, the RBA faces a massive challenge to keep the economy on track before mining investment collapses", Business Spectator's Callam Pickering said in a July 1 article.

Mr Pickering noted that dwelling price growth has somewhat moderated, although building approvals "declined sharply" over a three-month period.

Image credit: Reserve Bank of Australia Official Website

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