2012 Wrap Up

Mortgage holders and home buyers received an early Christmas present this year, with the Reserve Bank slashing 25 basis points off the official cash rate and taking it to an all-time low of just 3 per cent.

In terms of interest rates, it has been a good year for borrowers, with more than 125 basis points cut from the cash rate over the past 12 months. In fact, we haven’t seen a cash rate this low since September 2009.

So, while the news came as little surprise to many leading economists, home owners and potential buyers have an extra reason to celebrate this festive season. Several lenders have been quick to pass on the rate cut, with many more expected to make a move over the coming weeks.Whether you are an existing mortgage holder or are looking to enter the property market soon, rate reductions can only mean one thing – savings.

As the new year draws near, some economists are predicting an influx of activity in both the Australian real estate market and retail sectors as recent cash rate reductions filter through to consumers’ wallets. HSBC chief economist Paul Bloxham said the Reserve Bank’s recent decision reflects the country’s need for increased spending in economically sensitive sectors such as retail and housing.

“Lower interest rates are needed to support a pick-up in the non-mining sectors of the economy so that Australia sees a smooth transition from mining investment-led growth to growth that is driven by the interest-rate sensitive sectors,” Mr Bloxham said.

“Australia’s growth needs to switch from being commodity-price driven to being credit-driven, and the 175 basis points of rate cuts the [Reserve Bank] has delivered in the past year or so will help to drive this.”

The question on everyone’s mind now is what’s coming next? Can we expect to see the Reserve Bank lower the cash rate once more early next year, and should we wait and see before considering entering the property market?

According to Mr Bloxham, you may be disappointed if you decide to take the ‘wait and see’ approach.“The labour market remains a key focus for us, as do further signs of a pick-up in the housing and retail sectors over the Christmas period,” he says. “At this stage, we think this may be the last of the Bank’s cuts in this easing phase.”

If you are looking to enter the property market, there may be no better time than right now.

We are seeing an influx of discounted mortgage products currently available in the marketplace– with potential savings offering significant benefits to the hip pocket. Give us a call today if you would like to discuss your situation.