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Homeowner’s CodeThe recent decision by the Reserve Bank of Australia to cut the cash rate for the third time this year is expected to have a significant impact on the property market in the upcoming spring season. This rate cut, bringing the cash rate down to 3.60 per cent, is likely to fuel a surge in buyer activity, intensifying competition and potentially driving prices higher.
As anticipation of the rate cut grew, there was a notable increase in home loan pre-approvals, suggesting that buyers were gearing up to enter the market. Loan Market reported a substantial 53 per cent rise in pre-approvals in July compared to the previous year, reflecting buyers’ eagerness to secure financing amidst diminishing housing stock.
Leading the charge in pre-approvals are South Australia and the Northern Territory, with increases of 80 per cent. Western Australia follows closely with a 79 per cent rise, while New South Wales and the Australian Capital Territory saw a 49 per cent increase. Queensland, Victoria, and Tasmania also experienced significant growth in pre-approval rates.
This surge in pre-approvals occurs against the backdrop of dwindling housing stock levels. Ray White data indicates a 14.2 per cent decrease in new listings compared to the same period last year, adding further strain to an already competitive market.
David McQueen, CEO of Loan Market, highlighted the challenges buyers face in the current market environment and emphasized the importance of being well-prepared with a clear understanding of their borrowing capacity to navigate the competitive landscape effectively.
According to industry experts, the majority correctly predicted the Reserve Bank’s rate cut in the latest Finder RBA Cash Rate Survey. These experts now turn their attention to how banks will pass on these savings to consumers, with pressure mounting for lenders to reflect the rate cuts in their offerings.
Graham Cooke, head of consumer research at Finder, advised homeowners to review their current mortgage rates, suggesting that those with rates higher than 5.5 per cent may find better deals elsewhere. However, he also cautioned that lenders might scale back future rate cuts as more reductions are anticipated.
Analysis by Finder revealed that following the rate cuts, there are now suburbs where house and unit values are within reach for the average Australian. Affordability has improved, with the median house prices in various suburbs becoming more accessible to single individuals and couples with dual incomes.
Despite the enhanced affordability, Cooke warned that increased market activity could lead to rising prices and deposit requirements, potentially offsetting the benefits of lower repayments. He emphasized the importance of having a substantial deposit even with reduced borrowing costs, as market dynamics could drive up property prices and deposit thresholds.
As the market braces for heightened activity fueled by the rate cut, buyers are advised to carefully assess their financial positions and explore opportunities to secure favorable loan terms amidst the evolving landscape of the real estate market.
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