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Another month, another unchanged cash rate

By Andrew Bell

The Reserve Bank of Australia's (RBA) first meeting of 2016 was a highly anticipated one, as property market analysts, buyers and sellers waited to see what would be in store for the official cash rate (OCR). It hit an all-time low in May last year, bringing some relief to borrowers in a market that was at risk of over-heating 

Members of the monetary policy committee gathered on 3 February, and announced shortly after the news that the OCR would remain unchanged at two per cent. While this might be something of an anti-climax, what does it mean if you're on the lookout for Main Beach real estate and property in other parts of the city?

The impact on mortgage rates

The first OCR reduction was welcome news for property buyers, not least because the majority of lenders decreased interest rates on their mortgage products. This meant greater choice and flexibility for borrowers, who might otherwise have decided to wait before entering the property market.

However, this grace period was short lived. Several months later, many major lenders broke away from the RBA's cash rate and decided to increase their rates – something which has had quite an impact on the wider market.

The Housing Industry Association's (HIA) senior economist Shane Garrett explains: "The increase in mortgage interest rates during November was an unpleasant surprise for homeowners, and housing affordability will be damaged even further if this tactic is repeated."

Thankfully for buyers of real estate in Main Beach, Queensland isn't one of the areas worst affected by declines in affordability. The HIA Affordability Report found that during the three months to December, Canberra, Melbourne and Sydney all experienced the greatest falls.

What the latest cash rate decision means

However, that was 2015, and the property market is still benefiting from all the optimism that comes with the start of a new year. The decision to maintain the OCR at two per cent might not have come as a surprise to many, but it could give an indication about what's in store for the rest of the year.

The HIA suggests the RBA is prepared to take a "flexible approach" in 2016 and believes a further cash rate reduction could be on the cards. This would help support a number of industries and give the economy the boost it needs in both the short and long term.

HIA chief economist Harley Dale anticipates that fewer new properties will be constructed over the course of the year. As the economy is so reliant on this industry, this could encourage the RBA to take action through a further cut to the cash rate.

All this is, of course, merely speculation. Nobody knows what members of the RBA board are thinking, although minutes of the 3 February meeting do give some indication. Interestingly, RBA governor Glenn Stevens said non-mining areas of the economy gathered strength in 2015 – the challenge now is making sure this remains the case.

He noted that low interest rates are currently supporting demand, while regulations are in place to make sure lending stays on an even keel. There are still risks in the housing market, which the RBA believes are being contained as a result of the low cash rate environment.

If you're in the market to buy Main Beach real estate, then there's no reason why now shouldn't be the right time. Get in touch with the team at Ray White Surfers Paradise and we'll guide you through the buying process and find a home that suits your needs.

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