This year alone the Reserve Bank has passed on a number of interest rate cuts and there’s speculation they haven’t put the chopping block away yet.
Low rates are great if you want to lower your mortgage payments… assuming your bank passes on the official rate cut, which becomes harder the closer rates move to zero.
But what’s the effect of rate cuts on property prices overall?
Property guru Michael Matusik shared an interesting graph with Property Update readers last week.
It showed that Reserve Bank cash rate reductions had, historically, resulted in property price increases. But they didn’t always happen immediately.
“Falling interest rates do – eventually – help instigate house price growth,” Mr Matusik wrote.
Interestingly the Reserve Bank has cut rates 44 times since 1990. The cash rate in 1990 was 15.5 per cent. Fast forward to 2019 and rates are edging closer to zero.
Of course interest rates alone don’t move house prices. Jobs and wages growth also contribute as prospective buyers earn more cash to splash on a home. Population growth also boosts demand.
So what do all these broad economic trends mean if you’re looking to buy? Not much really. At the end of the day, it’s your own personal situation that matters. Figure out what you can afford to buy, then do you research on suburbs and properties in your price range. If you’re planning on setting down roots for some time, the market will cycle through many changes, but the important thing is you’re happy in your home and not financially stretched.
Think it’s your time to make a move? View our current listings for sale or talk to us about selling.
