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Another sizeable rate cut from the RBA yesterday is welcome news for the mortgage industry and could now spark recovery in the property market in early 2009.
The cash rate hit a six year low of 4.25 per cent yesterday taking the RBA’s total cash rate reduction since September to three per cent – a record rate fall within the space of four months.
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Christopher Joye, chief executive of research group Rismark International, told Mortgage Business that yesterday’s rate cut combined with the previous two per cent would translate into “surprisingly strong” buying activity in the new year.
“Households have benefited from a 31 per cent reduction in their interest servicing costs since August this year. That represents a huge improvement in affordability, which will be another fillip for the residential property market,” he said.
Mr Joye said home loan rates could even fall below six per cent in the first half of 2009 as the cash rate would likely drop below four per cent.
The substantial reduction in interest rates would stimulate all new home buyers, he said, be they first time buyers or simply up-graders.
Mr Joye was also upbeat about the outlook for property prices for 2009, despite “erroneous predictions from the doom and gloom merchants”.
“I expect to see residential property prices rise very slowly during the first half of 2009, given that housing demand of 190,000 homes per annum is running well in excess of housing supply of about 145,000 per annum,” he said.
