Rates Remain Steady As Outlook Improves – domain.com
The Reserve Bank will leave official interest rates at the record low of 2.0 percent over August. Rates have now been on hold for three consecutive months with the increasing likelihood that they will remain at current levels for the rest of the year.
The Bank cut rates in May by 0.25 for the second time this year following a similar easing in February. The bank has acted to cut interest rates to stimulate an underperforming economy impacted by reduced activity from the resources sector.
Latest economic data remains largely directionless however with the national unemployment rate rising marginally to 6 percent over June. Although building approvals fell over June this primarily reflected a drop in the volatile apartment market sector. The dollar has tracked sharply lower over the month providing another factor keeping the Reserve Bank on the sidelines.
The lowest mortgage rates since the mid 1960’s have activated the Sydney and Melbourne housing markets with both recording strong prices growth over the June quarter. Recent signs however point to a moderation in buyer activity in these markets with mid-winter auction clearance rates and auction prices falling. Other capital city housing markets continue to report modest to moderate results largely reflecting the impact of underperforming local economies.
Strong investor activity remains a key ingredient of current housing market activity particularly in Sydney and Melbourne. Although banks have recently moved to increase interest rates for investors at the questionable direction of regulators, activity from this group is likely to remain robust reflecting relatively high yields and the prospect of continued capital growth.
Article written by Dr Andrew Wilson and can be found at domain.com.au