RBA cuts rates

The RBA has cut the official cash rate for the second consecutive month, taking the new rate to just 4.25 per cent.

The Reserve Bank shocked the industry last month, when it cut the cash rate from 4.75 per cent to 4.5 per cent.

However, the Board’s decision to cut rates for the second month in December failed to surprise the industry, with the majority of economists forecasting another rate cut.

I was was not surprised by the rate cut, particularly given everything that has been happening in the housing market.

The rate cut should not come as a surprise from a housing market perspective, considering the soft market conditions that first became evident in June of last year have created no inflationary pressures and have persisted.

Capital city home values are down four per cent from their December 2010 peak and rental rates have increased by just 4.6 per cent over the 12 months to September.

The two interest rate cuts over the last two months will be a welcome improvement to anyone with a mortgage.

Hopefully this will lead to an uplift in housing transaction volumes which are currently tracking about 10 per cent below the five year average nationally.


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