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#pb# Mortgage Choice head of corporate affairs, Belinda Williamson, says there are ‘plenty’ of positive signs of an emerging market uplift in conditions, particularly in sectors of the economy that correlate closely to interest rate movements like housing finance market.
“The decision by the Reserve Bank to leave the cash rate at 3% in March, as expected by majority of market commentators, need not be seen in a negative light by anyone watching the property market. We are seeing encouraging signs in the economy that should lead to further positive consumer and business sentiment.”
However, the Housing Industry Association (HIA) is describing the move as a ‘missed opportunity’ for those employed in the struggling residential construction industry.
HIA senior economist, Shane Garrett, says this week’s building approval release from the ABS reinforces that a sustained residential construction recover is still a ways off.
“What's good for the residential construction market is good for the wider economy. International factors have squeezed many sectors of the Australian economy and this calls for further action from the RBA. The tool of interest rate intervention is blunter now than it has been in previous downturns.”
#pb# Garrett says the RBA's own figures show that the banks have withheld 0.4% of the 1.75% in RBA rate cuts since 2011 and that a large chunk of households are using mortgage rate cuts to pay down existing debt rather than adding to spending in the economy.
Real estate agency Laing+Simmons general manager, Leanne Pilkington, says she’d like to know what the RBA is waiting for.
"As former Reserve Bank governor Bernie Fraser recently noted, the big four banks have the means and the scope to cut their mortgage rates and still turn a very handy profit for their shareholders. There is even speculation the banks are considering reducing their mortgage rates independently, a scenario almost unheard of in the modern era.”
Even if the RBA’s influence over the major banks is loosening, Pilkington says it ‘can’t hurt’ to provide the banks extra impetus to ease the burden on mortgage holders – especially if they’re weighing up the option anyway.
#pb# "Almost all economists anticipate interest rates will decline over the course of the year. If it's a question of when, not if, there's no reason it shouldn't be sooner rather than later.
From a housing perspective, she says, a reduction in interest rates takes time to filter through to the residential market.
“Given we are now heading into the autumn and winter selling periods, it makes more sense to cut rates now to support the market through the middle of the year.”
