RBA rate cut expected within days

Experts predict an upswing in first homebuyer loans shortly with half the Big Four banks now expecting a Reserve Bank rate cut within days.

Two of the nation’s biggest housing market financiers, Commonwealth Bank and National Australia Bank, have brought forward predictions of an RBA rate cut to its October 1 monetary policy board meeting.

The market has already priced in an 82 per cent chance of a cut in the RBA’s cash rate target to 0.75 percentage points, given how the ASX 30 Day Interbank Cash Rate Futures has tracked.

Latest figures for the year to March showed housing affordability had flatlined in Queensland at 36.4 index point, with loans to first time home buyers falling to 4,677 for the period.

PRDnationwide chief economist Dr Diaswati Mardiasmo said the fall was “unsurprising given many first home buyers postponed their purchasing decisions” due to Federal Election policy uncertainty and tighter bank lending policies.

“The data really does show that for first home buyers price is not the only thing that matters for them,” she said. “FHB activity fell all across the country even though affordability increased … I do expect FHB figures to pick up slightly, but it’s probably not going to be a massive jump like suddenly double.”

CBA economist Michael Blythe expected RBA to cut the cash rate by 25 basis points on October 1 after the unemployment rate rose to 5.3 per cent in August.

“We believe that (the) labour force data is the smoking gun that will force the RBA’s hand,” he said.

NAB has gone further to expect a rate cut in October, followed by another in December “taking the cash rate to 0.5 per cent by year’s end”. This as expectations of federal government fiscal stimulus wane: “With monetary policy involving longer lags, we think the urgency to lower rates sooner has increased”.

The low finance rates are just one reason investors should consider expanding their portfolio sad Daniel Brennan of Hive Student Accommodation.

"We're seeing properties sell at very competitive prices, allowing 7% or better net return for some student accommodation properties. We believe this is due to restrictive financing conditions following the Banking Royal Commission combined with negative market sentiment driven by anxiety around the economy and the recent price drops in Melbourne and Sydney’s Property Market" he said.

Hive offers a complimentary assessment of any potential property purchase for their clients. Contact us on 1300 882 326 for your free assessment.

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