As the cool winter weather sets in, the Reserve Bank of Australia has hunkered down and kept the official cash rate on hold at 2.5 per cent for yet another month. It has now been a year since the RBA last reduced rates and introduced the low cash rate, creating a lengthy period of stability on interest rates. Analysts are predicting that the current low interest rate environment should continue for the remainder of 2014, with some venturing to suggest that interest rates could remain on hold until this time next year. The RBA's decision to keep the cash rate at historically low levels is being influenced by the high Australian dollar, which is causing slow growth in the economy and hampering our export markets. As a result, the cost of borrowing has hit an historical low. In late July and early August this year, lenders released some of the lowest fixed interest rates on mortgages ever recorded. There are also some excellent variable rate mortgages available. Due to these record low interest rates, property markets around the country are enjoying exceptional activity – which has only been reduced slightly by the onset of winter. National property prices are showing consistent gains month on month, with a year to date national average rise of just over 4 per cent. Whilst all capital cities are showing median house price gains compared to the same time last year, the Sydney and Melbourne markets are leading the way with rises of 6.3 per cent and 5.3 per cent respectively. Obviously, this is good news for property owners. But it could also be good news for those in the market to make a purchase soon. The low interest rate environment is expected to continue for quite some time, which means that we can also expect to see capital growth in property to continue due to increased demand for available housing stock. However, prices should be kept somewhat in check due to the amount of new residential building construction forecasted over the next three years. Master Builders Australia is predicting a strong pick up in new houses and apartments, with more than 200,000 properties set to come onto the market during that time frame. Now is a great time to discuss your financial plans with a professional. Home buyers, property investors and those looking to refinance are in a great position to take advantage of a rising property market and a very competitive loan market. For more information about how you could be taking advantage of the low interest rates to get ahead, give us a call today. Sincerely, The TAG Team
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