Rate Cuts are Here! What happens next?
By Graeme Salt
So, this is the moment.
The moment when rate cuts are amongst us.
After more than a year of speculation, most economists think interest rate cuts are imminent. What will be their impact?
Prices in many cities are currently either plateauing or trending downwards; only Perth and Adelaide are now showing robust growth.
While welcome news for borrowers, these rate cuts are unlikely to have an imminent impact on property prices.
Borrowing capacity has been slashed by 25 per cent since rates started rising in May 2022; cutting the amount people can afford to pay for homes, and even a further two or rate cuts this year would not be enough to ignite another strong increase in house prices.
Traders imply a 96 per cent chance of a February rate reduction to 4.1 per cent. What the cuts are likely to do is arrest any falls to make them short and shallow.
CoreLogic figures show the median value of a Sydney house fell 0.4 per cent in January to $1.47 million. This took the decline over the past three months to 1.6 per cent.
Melbourne’s median house value fell 0.5 per cent to $917,132 in January. Over the past three months, Melbourne prices dropped 2 per cent to be 3.5 per cent lower over the year.
Despite edging down, values remain well above pre-COVID levels. Total dwelling values across Sydney are 27.3 per cent above their pre-COVID mark, Melbourne is up by 7.8 per cent, Brisbane values are 68.2 per cent higher and Perth’s have soared 76.7 per cent.
Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055
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