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Interest Rates: No Change in September

By Rachael Vrana

It’s pretty much a case of “nothing to see here, folks”, with the Reserve Bank of Australia leaving interest rates on hold again. It has now been 13 months since interest rates changed, with the official rate still sitting at 2.5%.

RBA Governor Glenn Stevens says business conditions are improving and there’s been some recovery in household sentiment after a weaker period around mid year. “Interest rates are very low and have continued to edge lower over recent months as competition to lend has increased,” he says.

“Investors continue to look for higher returns in response to low rates on safe instruments.” Read the full RBA statement hereRP Data Research Director Tim Lawless says the latest housing market statistics were likely to be a topic of conversation when the RBA board met today. He says the RP Data CoreLogic home value index shows a 4.2% rise in dwelling values across the combined capital cities over the three months of winter.

And he says this shows growth rates across the housing market have rebounded since the softer readings in April and May. “While the rate of capital gains has been demonstrably high, growth in dwelling values has been very much concentrated within the Sydney and Melbourne markets, with every other city recording a much more sustainable pace of growth,” Lawless says.

“If higher home values were accompanied by a relaxation in lending standards that would definitely be cause for concern, however recent APRA data showed that the banking sector has reduced their proportion of high LVR lending over the June quarter.” Lawless believes the RBA will leave interest rates alone for the foreseeable future.

“With this week marking the beginning of Spring, the housing market will come under increased scrutiny to see if the seasonal surge in spring listing numbers is accompanied by an uplift in mortgage demand and buyer numbers,” he says.

“The latest indicators show that vendors remain firmly in the driver’s seat, with auction clearance rates averaging in the high 60% to low 70% range week on week and private treaty sales continuing to show a reasonably rapid pace of sale.”

Housing Industry Association chief economist Harley Dale says rates on hold will support new housing construction activity in 2014-15. “That is a tick in the box for the Australian economy – new housing is a clear bright spot for domestic demand and it needs to continue to shine,” he says. “A broader strength in domestic demand is required, including in the renovations segment of residential construction which has yet to display signs of sustained recovery from a decade low.”

Source: www.realestate.com.au

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