Breaking news: The Reserve Bank of Australia has left rates on hold at 2.75% p.a.
After an unexpected rate cut last month, the RBA has chosen to keep interest rates steady at 2.75% p.a. for June – the lowest benchmark rate in 53 years. Their May cut was spurred by a "surprisingly low'' inflation reading and a need to “encourage sustainable growth”*.
With the effects of that cut still flowing into the market, and the Australian dollar slipping below parity, it’s expected the RBA will cautiously monitor the situation before making additional rate adjustments this year.
Yours in FinanceJpcashflowParticipant@jpcashflowJoin Date: 2007Post Count: 575
Good topic Richard,
I think any further rate reductions will be on hold until the following data is reported:
1) With the falling Dollar will manufacturing and exports increase? Its to early to tell – My guess this data will be reported in another 3 months
2) Retail and spending data: With the dollar decreasing – Government bodies will hope that both brick and online (Domestic) sales increase if international sales are still on the rise then falling dollar and low interest will do nothing to stimulate the economy.
3) I Sold my share portfolio about three weeks ago before the dollar started crashing (thank god for that) and you can already see that both bonds and equity markets are starting to decrease in value…
What will happen in property? I think low rates are great for investors but my question is if it becomes more affordable to buy your own home will current tennents opt for buying a home not stop renting?WhatIfWeFinanceMember@whatifwefinanceJoin Date: 2009Post Count: 58
Interesting. Out of interest what do we think the next interest rate move will be?Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
Just because interest rates are currently falling this certainly does not mean that tenants will rush out and buy their own home.
Firstly the qualifying factors for a home loan have got stiffer and stiffer and the withdrawal of cart blanche Stamp duty discounts and give away Grants mean that for a $300,000 purchase the buyer needs to hold around $25K minimum in genuine savings.
Other consideration is many tenants rent as a lifestyle choice and have no intention of purchasing their own home.
If you look at Europe where ECB interest rates are at 0.5% and in the UK where domestic borrowing rates are around 2.75% the percentage of owner occupied properties has actually fallen over the last 5 years.
Economic uncertainty is not conducive to Tenants taking risk in home ownership as this is left to investors with budgetary control and increased equity.
Course like many investors i see the opportunities ahead and have this week tipped my toe into my first Commercial purchase.
Yours in FinanceJacqui MiddletonParticipant@jacmJoin Date: 2009Post Count: 2,539
Richard is very correct
There are suburbs out there that are full of people that have no intention of ever buying their own homes for a number of reasons:
– Lack of savings and lack of ability to save
– Unable to get a loan due to employment circumstances not favoured by lenders
– Born into a family-tree of people who simply don't teach their kids to aspire to buy their own homes. The mindset is to rent permanently
– Wanting to reside in areas that they cannot afford to buy into, and thus deciding to be tenants instead
– Being unemployed, on a pension etc. Such folks have "income" from benefits but cannot get a mortgage
The primary concerns many of my tenants have are things like:
– Having awesome internet connection so that it is possible to play World of Warcraft uninterrupted (and World of Warcraft access cards cost $40 a pop, so I'm told… buy a few of those each week and there is not much money left for savings)
– Having Foxtel for uninterrupted viewing of sports and so on
– Having as few bills in their names as possible. A rental bill and an electricity bill is about where the coping limit is. The prospect of adding complex things like mortgages, water rates, council rates, and maintenance, is too much for lots of people to bear. They'd prefer their expenses to be a bit more predictable, and the idea of being responsible for the maintenance of a property is terrifying to some folks. They'd rather pay more in rent than they would on a mortgage just to avoid it.
Exactly JacM it is all about personal choice and thankfully we are not equal otherwise who would i rent my places to?
We are finding the level of enquiry for Vendor Finance has gone up a notch and at the same the level of enquiry for 100% lending for investors has done likewise.
Citizens of Australia like any Country are not all born equal and there will always be the have's and the have not's.
I own 1 property in my SMSF which i purchased in 2003. At the time the tenants had been renting it for 30 years and they decided they would like to stay on.
That was 10 years ago and now the rent is a lot higher than the cost of the mortgage repayment they will never move out (Unless it is a wooden box) as they are comfortable, someone else pays the rent for them and they can treat it like their own without all of the responsibilities.
Just watch home many first home buyers hand the keys back to their bank at the first sign of interest rates moving north…….
Oh you have to love property when you are on the right side of the ledger.
Yours in Finance
Further interesting statement released today in the Housing Affordability Index quarterly review:
First home buyer numbers plummet:
• Number of new finance commitments to first home buyers dropped 22.5% in the March quarter, a drop of 21.3% compared to the same time last year.
• They made up just 14.5% of owner-occupier market – the lowest number since the June quarter 2004.
• South Australia was the only state to record a rise in the number of loans to first home buyers, up by 1.8%.
• Biggest falls were in Vic, Queensland and NSW, which fell 43.2%, 41.8% and 40.6% respectively.
Maybe lower interest rates wont be driving first home buyers back to the market less it be to stay with mum and dad or rent from uncle Richard.
Yours in FinanceCorey BattParticipant@cjaysaJoin Date: 2012Post Count: 1,010
Good stats there Richard.
SA will most likely drop in FHB loan numbers as the grants finalise.
It is interesting, I do see a lot of clients in the 21-29 demographic with large deposits living at home. There appears to be no great urgency to move out, as the resounding opinion is that they are scared to enter the market, as they have been conditioned to believe the sky is about the fall in with prices, coupled with the usual Today Tonight/'parents advice' saying how difficult/impossible it is to purchase a home.