The Reserve Bank of Australia (RBA) began its two-day meeting on monetary policy on Monday. And brokers nationwide are anticipating the central bank will cut rates.
The RBA caught markets off guard in July when it decided to hold the official cash rate (OCR) at 3.85%, defying expectations of a cut. But this time around economists – including all of Australia's Big Four banks – are anticipating a rate cut of 25 basis points.
A reduction in interest rates could supercharge Australia's already hot housing and mortgage markets, by boosting borrower capacity and helping more would-be homeowners make the leap onto the property ladder. But it would also fuel competition amid a persistent housing shortage and likely drive prices even higher.
Australian Broker checked in with a few brokers and key market players nationwide to get their take on what another rate cut could mean for the property and loan markets.
Founder and chief executive officer of Melbourne-based brokerage Blank Financial
"We're definitely anticipating another rate cut. Any kind of change with the Reserve Bank [of Australia] has a direct impact on market sentiments. And obviously, we're going to start to see more activity from buyers. [At the moment] a lot of customers are just waiting to see what's going to happen with the next Reserve Bank announcement. So it should be good, good news for real estate.
"We are seeing a lot of customers [trying to get into the market before the next RBA decision], because this has a direct impact on borrowing capacity. Any rate cut will allow customers to have more savings in their pocket, or even, in some cases, push higher with purchase prices."
Managing director at Sydney-based brokerage Bell Partners Finance
"The Reserve Bank of Australia would be justified in cutting 50 basis points off the official interest rate at [the] next board meeting, but will probably be more cautious. The RBA would be justified in lowering rates by half a percentage point because they probably should have delivered a 25-basis point cut last month. That will be a welcome relief for mortgage holders, and they could also be hopeful of another reduction in November.”
Co-founder at Sydney-based brokerage Vita Finance
"There's a few things happening at the moment. Definitely a rate cut is needed, just to give a bit more confidence back into the market. We've obviously had two rate cuts this year, but if you look at all the big banks, everyone's forecasting a few more rate cuts before the end of the year. With inflation cooling to within the Reserve Bank's 2% to 3% target [range], it seems like things are definitely slowing in the economy. So a rate cut would just add a bit more confidence back in the market.
"With the first two rate cuts this year, there was a bit more momentum building. But I think over the last couple of months, that has flattened a little bit. A further rate cut is required just to give that little bit more confidence back into the market. [CPI] inflation is now roughly around that 2.1%. The labour market has also softened. So that's showing a bit of the picture of the Australian economy, that it's not as strong as what probably the Reserve Bank initially thought. And if you look back, last month, everyone was saying that they would get a rate cut. But the Reserve Bank paused [rates], because it's a matter of the Reserve Bank needs to see more data before they can make that call. And it takes months for that updated data to flow through. But all signs at the moment are showing that things are softened, so a rate cut is called for.
"And the other part of it, too, is the supply issue. From what we typically see, it's a bit of a false economy, in that property prices have remained strong. But I believe that largely just speaks to lack of stock in the market. There's not that much supply.
We work with a lot of real estate agents in the marketplace, and everyone's saying that typically in the winter months, there's not many properties that do come online. Usually it's in the spring. But this year, there are a number of properties that are coming online. Whatever is being listed is going well. Everyone's asking that same kind of property, that turnkey property, where they just move in, no renovation required, no builds. So that's maintained property prices to be still strong. And that's largely because of the supply side of things being limited."
