The Reserve Bank of Australia has left the official cash rate unchanged at 2.5%, in line with analysts’ predictions. It’s the second month in the row the Bank has left rates unchanged at a 53-year low.
Many economists are predicting the cash rate to drop as low as 2% over the next 12 months with a rate cut as early as the next RBA meeting, November 5. The Bank has previously cut rates in August 2013, May 2013, December 2012, October 2012, June 2012, May 2012, November 2011 and December 2011.
RP Data’s Tim Lawless says the current interest rate setting is providing an appropriate level of stimulus. He says housing values across the combined capital cities have recently reached a new historic high after recording a 7.7% peak to decline correction between October 2010 and May 2012. “Not only are home values up by 8.7% since the recovery trend kicked off in June last year, but there has also been a sharp improvement in the level of credit demand for new housing,” Lawless says.
The number of mortgage commitments for new housing has risen by more than 50% over the 12 months to July, mortgage activity is continuing to trend higher indicating that housing finance demand is continuing to gather momentum as the market moves through spring.
“Dwelling approvals have also been trending higher which is another positive sign that the low interest rate setting is flowing through to new housing investment which is one of the key desired outcomes from the low cash rate setting,” he says.
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