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What could a record-low cash rate mean for Gold Coast property?

By Andrew Bell

There's no denying the Gold Coast is a great place to live – we've got all sorts of amazing attractions in the city, including our world-renowned theme parks, famous beaches and wonderful shopping districts.

Access to this sort of lifestyle may well have just become a lot more affordable, as the Reserve Bank of Australia (RBA) decided to cut the official cash rate (OCR) to a record-low 1.75 per cent.

A year ago, the previous record was set at 2 per cent, but inflation and other pressures on the Australian economy have forced the RBA to make a decision to ease some of the burden. This is potentially great news for buyers of Gold Coast property.

Why has the cash rate been lowered?

To keep pace with how the rest of the Australian economy is going, the OCR is the rate at which banks are loaned money by the RBA, so a lower cash rate will ease the burden on banks. In turn, this could decrease the amount of interest that they charge to their customers for home loans – although that's a decision left entirely up to them.

If banks do decide to lower interest rates in order to draw more customers, mortgage options are likely to improve as well, and prospective buyers will be encouraged to get into the market and make a play for that Gold Coast real estate they've always wanted.

Does that sound like something you could be interested in? Cross your fingers and hope the banks respond positively to this new record-low cash rate!

The OCR no longer remains the same

The RBA last made the decision to cut the OCR in May 2015 – this was a 0.25 per cent drop to 2 per cent. For a whole 12 months, that rate didn't change, and that's because of the stability the national economy has shown on a global scale. While markets such as China and the US have seen ups and downs since last May, Australia has been steadily humming along.

"Latest ABS data confirm that price pressures in the economy are very well contained," said Housing Industry Association (HIA) senior economist Shane Garrett in a 3 May media release.

"Lower rates will provide real benefits to households and businesses right around Australia. Today's rate cut represents a timely and measured initiative."

However, there has been a tightening on the housing market in recent months, with CoreLogic RP Data reporting that the median house value in Sydney is $1,031,730 – an increase of 2.4 per cent over last month. With this holding the potential to affect the economy in a negative way, a cash rate cut was the only logical solution.

"This was the first time since 2008 that we have actually seen a quarterly deflation result," noted Mortgage Choice CEO John Flavell.

"Knowing this, it seemed the Reserve Bank had no choice but to cut the cash rate."

How could this work in favour of buyers and sellers?

For anyone in the property market at all, this decision will come as good news. For both buyers and sellers, more activity could be on the horizon. Savvy sellers will look at this information and look to move property on at an opportune time, while buyers will be greeted with a plethora of available properties, and maybe even reduced competition.

That's all dependent on the banks deciding to lower interest rates, however. Even if it doesn't happen right away, there's the chance that a continually low cash rate will force the hands of the biggest lenders, and mortgages might become more accessible as a result.

Property on the Gold Coast could be set for something of a revolution over the next few months. Get in touch with the professional team at Ray White Surfers Paradise today to see what we can do for you.

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