"Consumers have a clearer outlook for their purchasing journeys"
Industry experts have reacted positively to the Reserve Bank of Australia’s (RBA) decision to maintain the cash rate at 4.35%, marking only one increase since July and providing a semblance of stability for borrowers and the property market.
Both Sam White (pictured left), executive chairman of aggregator group LMG, and Julie Toth (pictured right), chief economist at property exchange platform PEXA, highlighted the benefits of the latest RBA decision for the Australian property landscape.
“After the steady rises in 2022 to 2023, when borrowers watched rates increase at monthly intervals, consumers have a clearer outlook for their purchasing journeys,” said White, who also said that LMG has observed a 5% increase in loan pre-approvals at the start of 2024 compared to last year, aligning with heightened auction market activities.
He stressed the importance of brokers in educating clients about the unpredictable future of cash rates.
“Brokers play an important role for Australians; keeping their clients prepared for any movement in the cash rate. That’s why seven out of 10 borrowers choose to work with a broker,” White said.
Toth echoed White’s sentiments, pointing out the extended pause in interest rate changes as a relief for mortgage holders and first-time buyers, fostering confidence in a resilient property market.
“Australia’s housing market stabilised throughout 2023 and has remained resilient into early 2024 – in terms of pricing and sales activity, even though inflation and consumer demand cooled rapidly after the RBA’s last rate hike in November,” Toth said.
“We know from PEXA’s Property Insights Report, that settlement transaction volumes increased in each of the final months of 2023, for both residential and commercial properties across the mainland states.
“While cash buyers are a large and growing force in Australia’s property market, the announcement of an extended pause in interest rate changes will foster greater confidence among the vast majority of buyers who still rely on mortgages to finance their home or investment purchases.”
Both White and Toth foresee continued borrower activity and market stability, at least until the RBA’s next monetary policy meeting. However, they also caution against the assumption of a permanent halt in rate changes, underscoring the need for vigilance in monitoring economic indicators.
“No one has a crystal ball – predicting the future of the cash rate is fraught,” White said. “Inflation is slowing but still not within the RBA’s target of 2% to 3%. Additionally, there’s uncertainty with overseas conflicts and a very tight unemployment market.
“With the rate hold, brokers can expect the increase in borrower activity to continue into the middle of the year, which is normally a softer period for property purchases.”
Toth, meanwhile, expects rates to remain stable until at least May.
“However, while the case to keep rates stable is looking stronger, with confirmed decelerations in headline inflation and consumer demand pressures over recent months, looking ahead, we cannot totally rule out another interest rate rise until inflation is more firmly anchored to the RBA’s 2% to 3% target band,” Toth said.
“The RBA will remain guided by movements in the CPI, as well as consumer spending behaviour, labour markets and of course, the housing market.”
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