sure while inflation is going down within the RBA’s target band, 2-3%, everyone was thinking there would be another rate cut today. However, the RBA has now confirmed that the cash rate will remain at 3.85%. But what is the current situation? And how will this scenario affect borrowers, homebuyers and investors in the market?
Current Scenario
Over the past month, there have been signs that the economy is slowing. There has been a reduction in household spending, a slight decrease in wage growth, and a cooling of inflation.
This had created room for a potential 0.25% rate cut, which many experts believed would happen today. But this didn’t happen, though, and the cash rate is still the same.
However, factors like market risks and global uncertainties still hold a major concern and will create a major impact on the housing market.
Rising Trend In Pre-Approval
The pre-approval rate has already increased. Research says that there is a 53% rise in pre-approvals yearly, followed by the June rate cut.
State-wise, it rose 52% in Queensland, 36% in New South Wales, 9% in Western Australia, and 60% in South Australia. Even borrowing power has increased by $27,000.
So, what would happen next?
Lower Home Loan Interest Rates
Now that the RBA has kept the same rates, it will bring home loan interest rates unchanged or slightly lower. As a result, the repayments may/may not go down, and borrowing power may/may not increase.
But this may still significantly impact property prices, which is a major concern for first-home buyers to secure their first home. As for homeowners, this can be a good time to earn high rental yields on their properties.
They can also sell their properties if they hold them for a long time to get high capital gains. And for refinancers, they can think of switching to another home loan for better loan terms and conditions.
What Should You Do Now?
The rate has finally remained unchanged, and it is not positive news for everyone. Interest rates may still go down slightly but will likely bring more competition in the housing market.
That’s because with already low interest rates, more people will enter the market, and thus the property prices will continue to rise. Also, over time, lending policies have changed, which will further pose a major threat to first-time home buyers.
Therefore, they should pre-plan their budget, pre-approvals, and sort their finances overall. However, if you are already a homeowner, this is a favourable time for you to refinance. And investors, too, can look for high-yielding properties before prices go up, considering their long-term potential.
Final Thoughts
Despite the news that the RBA’s cash rate remains at 3.85%, the housing market is already gaining momentum. Property prices are rising while home loan rates are down. That means for every group of borrowers, both risks and opportunities exist.
First-home buyers may benefit from lower interest rates, but they’ll also face higher competition and rising property prices. Homeowners can consider refinancing to access better rates and reduce repayments. And investors can explore high-yielding properties or capital growth opportunities before values climb further.
For more guidance on how you should plan your next step, book a call with us at 1300 GET LOAN, 0456 267 or an appointment.
