At its April board meeting, the Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold at 2.5 per cent. This is the seventh consecutive meeting where RBA Governor Glenn Stevens has announced that the cash rate will remain on hold. In his monthly statement, Governor Stevens said once again that "On present indications, the most prudent course is likely to be a period of stability in interest rates." But despite this statement, borrowers are warned to start preparing for higher costs. Analysts are predicting that the cash rate will probably rise in the fourth quarter of this year, or early 2015. Meaning now is the time to plan ahead! According to the RBA's biannual Financial Stability Review released in March, many Australians are doing just that and are using the low interest rate period to pay off their mortgages. Data from the report indicates that mortgage holders are on average 24 months ahead on their mortgage repayments, which places them in a strong financial position should interest rates eventually rise. Recent data would also indicate that the low interest rates have been stimulating a property market recovery across the country. In March, the average house price rose by 2.3 per cent nationally, taking the total home price growth for the first quarter of 2014 to 3.5 per cent. On average, national home prices are up by 10.6 per cent compared to a year ago. The pricing recovery is being led by hot markets in both Melbourne and Sydney. Melbourne had the strongest three month growth at 5.4 per cent, while Sydney was up by 4.4 per cent.  Other cities showed a more modest capital gain, with only Perth showing a slight decrease for the quarter. Meanwhile, the low interest rate environment has also been stimulating new home construction. In the past year, new building approvals have risen by a very strong 34.6 per cent. Most of this residential construction has been centred on approvals for apartments and multi-unit dwellings which were up by 46.3 per cent over last year. Approvals for detached houses rose by 26.4 per cent over last year. The increased number of new homes coming on to the market is great news for first home buyers and investors looking to purchase property whilst interest rates are low. Increased availability should help to keep these sectors of the housing market at affordable levels, with plenty of opportunities available to those on the lookout for a bargain. Trends would also indicate that more and more borrowers are looking to fix their mortgage interest rate now, whilst rates still remain low. Some very competitive rates are currently available to those anticipating a rate rise by the end of the year. There are plenty of very competitive loan options available to those looking to purchase property with a low deposit, those looking to refinance and invest. If you'd like to find out more about your property financing options or property market trends, please call us. Sincerely, The TAG Team

Back to Newsroom