Hold on interest rates provides relief, as RBA closely monitors economy

8 June 2024

The continued hold on interest rates has further boosted buyer confidence amongst Perth homebuyers and fuelled relief for stretched mortgage holders.

In early May, the Reserve Bank of Australia decided to again hold the official cash rate at 4.35%, staving off another potential interest rate hike as cost-of-living pressures bite.

As some mortgages transition from low fixed rates, households are reining in discretionary spending and seeking out refinancing options to accommodate additional expenses.

But the hold on interest rates and tax relief announced in the recent Federal Budget is driving increased confidence amongst buyers in Perth’s already heated market.

Mont Property Managing Director Matthew Podesta said despite speculation about whether interest rates would remain on hold, demand for established homes was unwavering.

“Property sales in Perth are being driven by massive population growth and a challenging rental market,” Mr Podesta said.

“While interest rate increases are, most certainly, affecting sectors of the market, demand for established homes is still incredibly high with buyers desperate to secure property in a tight market.”

According to CoreLogic, the number of properties available for sale in Perth is more than 40% lower than the five-year average for this time of year. New listings are being absorbed quickly by market demand, keeping stock levels low and upwards pressure on prices.

This week, RBA Governor Michele Bullock acknowledged that “a portion of the population”, particularly renters and those with large mortgages, were “hurting”, but said there was no guarantee the reprieve on interest rate hikes would continue.

She said the RBA was keenly monitoring the economy and would respond accordingly.

“If it turns out, for example, that inflation starts to go up again or it’s much stickier than we think (and) we’re not getting it down, then we won’t hesitate to move and raise interest rates again,” Ms Bullock told a Senate Estimates hearing this week.

“In contrast, if it turns out that the economy is much weaker than expected, and that puts more downward pressure on inflation, then we’ll be looking to ease.

“We have to think of the economy as a whole.”

In announcing the latest monetary policy decision on May 7, Ms Bullock said while progress had been made to rein in inflation, continued vigilance was prudent.

“Getting inflation back to target will take time…The path will likely continue to be bumpy and we should all be prepared for that,” she said.

The RBA will make its next announcement on monetary policy on Tuesday, June 18.

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