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Rates on Track

2 Jul 13

The Real Estate Institute of Australia (REIA) says while interest rate cuts over the past 12 months have been most welcome, today’s Reserve Bank of Australia (RBA) decision to leave the cash rate on hold has left room for further cuts later on.

"REIA was pleased the RBA cut rates to a historically low figure in May, but we didn’t expect it to ease monetary policy further today," says REIA President Mr Peter Bushby.

In May, the RBA cut the cash rate to 2.75%. The standard variable interest rate now sits at 5.9%, 0.3 percentage points lower than the level recorded three months ago.

"The market has been reacting positively on the recent cash rate cuts. The first quarter of 2013 had the seventh consecutive improvement in housing affordability."

"As published in the Adelaide Bank / REIA Housing Affordability Report, the proportion of income required to meet loan repayments decreased 0.5 percentage points to 29.9%."

Mr Bushby noted that declines in mortgage rates stimulated demand from investors and non-first home buyers. The challenge is to entice first home buyers to get a toe-hold in the market.

"Auction results are improving in strength, while increases in housing finance commitments and building activity are also positive," concluded Mr Bushby.

The Bendigo Bank / REIA Real Estate Market Facts report for the first quarter of 2013 shows that property prices are higher than they were last year and consumer confidence is building.