Interest Rates remain the same – what does this mean for Property Investors?

Kate Rollan Property Investment Reports Leave a Comment

Interest Rates remain the same – what does this mean for Property Investors?

The Reserve Bank of Australia (RBA) has this week released their decision to keep the cash rate at 2.5%.  This is a welcomed decision by Property Investors after much recent speculation about the forthcoming RBA decision and concerns over property investment loans and rising property prices.

RBA governor Glenn Stevens released the Boards official decision regarding financial market stability commenting “financial conditions remain very accommodative. Long-term interest rates and risk spreads remain very low. Markets still appear to be attaching a low probability to any rise in global interest rates or other adverse event over the period ahead”.  Future predictions from the Board indicate “a period of interest rate stability”, a sigh of relief for Property Investors.

There was much anticipation from investors for a comment from RBA about their concerns about rising house prices particularly in Sydney and Melbourne and the tightening of investment home loans. Unfortunately, no comment was made, just a reference to a “pick-up in recent months in lending to investors in housing assets” and “dwelling prices have continued to rise over recent months”.

Property Investors didn’t have to wait long – Luci Ellis, Head of Financial Stability commented on recent RBA developments at a Sydney Conference on Thursday. She summarised the RBA’s concerns as being specifically with “the investor segments of the Sydney and Melbourne markets” and lending issues such as the “vast bulk of that new borrowing is to purchase existing properties” as opposed to the construction of new properties, and “lending standards”.

For Property Investors, this may be a double-edged sword. It’s great that the cash rate has remained static and appears as though it will remain stable for some time; however, lending for property investment is predicted to tighten. It may mean that investors have to contribute more of their own money to fund the purchase, lowering borrowing risks but making property investment unattainable for those needing to borrow a higher percentage of funds

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