Will the rate cut lead to a property boom?

houseLast week the Reserve Bank cut the official cash rate by 25 basis points to a new historic low of just 1.5 per cent.

The move was widely predicted by economists and while low inflation reports were reported to be the main reasoning behind the cut, housing market developments were also a major factor in the Reserve Bank’s decision.

Whenever interest rates are cut there is always a risk that is will set the property market in overdrive and this is always a concern for the Reserve Bank, particularly in popular housing markets like Sydney and Melbourne.

However, while we saw a property market frenzy after interest rate cuts last year, it’s looking less likely that we will see a repeat this year.

The Reserve Bank seems to be comfortable with the level of activity in the housing market at present.

In a statement from the Reserve Bank’s governor Glenn Stevens, he said prices “have been rising only modestly over the course of this year”.

“Growth in lending for housing purposes has slowed a little this year,” Mr Stevens added.

This slowdown is likely thanks to supervisory measures put in place by the Australian Prudential Regulation Authority (APRA).

The property market will likely pick up somewhat after the latest cut though, particularly for affordably priced properties.

We currently have the cheapest interest rates in history and if you are in a position to buy, it is a great time to start looking at your options and taking advantage of some great home loan packages that are available.

Those looking to buy do need to remember that they will need to shop around to find the best rate. Most lenders seem to only be passing on a portion of the rate cut so compare what is out there before going with your first offer.

If you need help with finding the best rate then talk to the team at Professionals Finance.