What is the effect of the RBA Rate Cuts?
The uncertainty that some people may have experienced just before the federal election, is behind us now. Thank goodness for that, as it affected the decision making of so many.
Since the election results were finalised we’ve seen a number of interesting subplots play out with many market pundits predicting a faster than expected rebound in housing prices and a more positive outlook for the broader economy.
How will that affect the property market? Well….I suggest we rather look at the effect it may have on the mortgage sector. Here are a few key things we’ve noticed that could have a positive impact on the Mortgage sector:
RBA Interest Rates
RBA Rate Cut
There is widespread speculation about the possible cuts to the official cash rate, by the RBA. Economists have recast their predictions post the election with at least one rate cut of 0.25% predicted as early as June, and some predicting a further 2-3 cuts before the end of 2019.
The impact of this as a stimulus to the broader economy cannot be under estimated. The flow on effect for borrowers could have positive impacts on both the mortgage landscape, as well as the outlook for the property market and an earlier than expected rebound in house prices.
APRA Servicing Buffer:
We have recently seen the significant impact of APRA imposed servicing buffer rates of over 7%, and how this was having a detrimental effect on a client’s ability to borrow.
With APRA now proposing to remove this buffer rate, there are indications that a clients borrowing capacity will increase in the short term. APRA’s final position will more broadly known after the industry consultation period ends in a few weeks.
At this stage they have indicated moving to a flat buffer of 2.50% above the “actual” interest rate offered by the lender. In some cases this could see the buffer rate drop closer to 6%, and have a significant impact on a client’s servicing position.
What does that mean to you, as the home buyer?
We have seen some detailed industry analysis in recent weeks that has predicted the potential impact of both the RBA rate cuts and the removal of APRA’s stringent 7% buffer rate.
Borrowing capacity under both scenarios, is predicted that it may increase by as much as 15%, according to some analysis and this would clearly have a positive impact in many circles and see a likely increase in consumer sentiment.
Lenders continue to to review Interest Rates independently of the RBA with some already making reductions in anticipation of the RBA decision.
There are different interest rates available from the various lenders and it is important to either talk to one of the team members of Buy Real Estate Australia to find out which mortgage broker or loan specialist may be best to serve you.
If you are looking to find out what your borrowing capacity is, before you apply for a Home Loan, then I advise you to Click HERE so that one of our friendly Loan Specialists can get in touch with you (no obligation from your side)
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