Following higher-than-expected inflation data released last week, the Reserve Bank of Australia (RBA) today announced it will keep the cash rate on hold. This follows three cuts this year, with the cash rate currently sitting at 3.60%.
While homeowners may have been hoping for another cut to further reduce interest rates, this could prevent adding fuel to the already hot property market.
A large driver of the increase in competition in the market has been first-home buyers. Loan Market Group data shows a 39.2% surge in first-home buyer loan applications in October. The data showed first-home buyer market share increased by 29% in the month, now responsible for 7.9% of property purchases.
This follows the federal government’s move to expand its Home Guarantee Scheme, now known as the 5% Deposit Scheme.
First-home buyers in Queensland recorded the largest uptick in average weekly applications compared to the September quarter (up 55.2%) followed by South Australia (44.9%) and Western Australia (38.9%).
New South Wales and Victoria registered average weekly increases of 34% and 33.5%, respectively, since the October 1 expansion.
What changes were made to the 5% Deposit Scheme?
The key changes to the scheme included:
- No income caps
- Increased property price caps to reflect market growth
- Unlimited spots available
This is available to eligible Australian citizens and permanent residents who have never owned property or haven’t owned property in the last ten years.
30 lenders currently participate in the scheme.
Find out more about the 5% Deposit Scheme.
Why the hold could help people looking to buy
When there is a cash rate cut, it often leads to lower interest rates on home loans and increased borrowing power for people applying for loans. This generally means there is more money available to bid on property, which can drive up competition and property prices. Because of this, the cash rate being held steady can provide some breathing space for those looking to purchase property.
If you’re looking to purchase property, whether it’s your first home or next home, reach out to a Loan Market broker for a chat.
