Caution is likely before more cuts
There were no surprises this week when the Reserve Bank cut official interest rates by 0.25 per cent. Given that our current inflation rate is tracking very much in the middle of the RBA’s target range, this move was expected by the large majority of economists.
This move will provide some welcome relief for many local residents. For example, the average homeowner with a mortgage loan of $750,000 should see a reduction in their repayments of a bit over $120 per month. However, as we pointed out in LAST WEEK'S POST, the big question is what happens now?
From the comments that accompanied the decision by the board of the Reserve Bank, we probably shouldn’t be holding our breath for a rapid series of additional cuts to interest rates. As I mentioned last week, the NAB are predicting that interest rates will be a full 1.0 per cent lower by this time in 2026, however I would expect the Reserve Bank to keep a very close eye on a number of key economic indicators before they announce their next rate cut.
Not only will they be watching the uncertainty around the overall global economy at the moment, but more local factors like our tight employment market and weak Australian dollar will also play a role. Of course, they will also be watching property values in case there is an immediate reaction to this month’s rate cut in housing affordability.
From a personal point of view, I suspect that the biggest response to the rate cut will be in the confidence levels among many home buyers. The confirmation that mortgage costs are heading in a downward direction, along with the increased borrowing capacity that comes with cheaper interest rates, is likely to spur more buyers into action, particularly those who are keen to secure their next home before additional rate cuts start to drive prices higher.
With this in mind, I would encourage all of our readers to take advantage of our experience and local knowledge here at Barry Plant Thomastown by locking in an obligation-free chat to clarify your future plans. We are always happy to help, so don’t hesitate to give us a call on 9466 3233.
Cheers,
Con Constantinou
Barry Plant Thomastown