|
Cash Rate reduced by 25 basis points to 3.85%. |
|
On the 20th of May, the Reserve Bank of Australia reduced the Cash Rate to under 4% for the first time in two years. The majority of reputable home loan lenders in Australia have since announced they will pass on the full 25 basis point cut, which should be implemented on new and existing loans by early June. April inflation data suggests that inflation remains steady, although Trimmed mean inflation increased slightly from 2.7% to 2.8%. Headline inflation held place at 2.4%. Trimmed mean inflation (a.k.a underlying) has typically been the RBA’s preferred measure, with a slight increase potentially halting another Cash Rate until August. The RBA should be pleased that both measures of inflation remain within the target band of 2% to 3%, heading into the next meeting between the 7th and 8th of July. What’s the difference between Headline and Trimmed mean inflation? Headline inflation, is commonly known as consumer price index (CPI), and measures the overall change in the price of all goods and services, including items like groceries, energy, and housing. Trimmed mean inflation, is a measure of underlying inflation that filters out the most extreme price changes (both up and down). Will the housing market be impacted? With lower interest rates and improved buyer confidence, it should lead to increased activity in the housing market. House sales should increase, and in turn prices will likely continue to climb, building on the momentum that started after the rate cut in February. Lower home loan rates will help make borrowing more affordable, with greater lending capacity available to prospective buyers who are currently maxed out. It’s a positive trend overall, but rising prices could still pose a challenge for first-home buyers trying to enter the market. For those who own property, the reduction in interest will be a welcome relief in the short-term, and the gains in equity will strengthen your position for the future. End of Financial Year Heading into End of Financial Year, we are glued to our screens seeking the best deal for our existing clients, and doing our all to make the dream of home ownership happen for those seeking to buy. For those looking to buy at auction this weekend or lodging refinance applications; be wary of June 30. Lenders adjust their service times in relation to the June 30 rush, with cutoffs in place to avoid deadline delays. Please be aware if you’re setting a date on a contract! Self-employed clients should look to open conversations around your borrowing capacity prior to finalising numbers for your accountant. We’re happy to work with you and your accountant to ensure your borrowing expectations are in line with your taxation plans. It’s a busy time of year, but we’re always open for a chat to look at how we can help you. |
