The REIV supports the recent calls by the Federal Treasurer for the private banks and other financial institutions to immediately pass on future reductions in interest rates by the Reserve Bank to mortgage holders.

Over the past six years the Reserve Bank has lifted the official interest rate a total of twelve times taking the rate from 4.25 per cent in April 2002 to the current rate of 7.25 per cent. In recent times the private banks have also increased interest rates in addition to the RBA increases.

As a result of the increases the standard comparison rate is now between 9 and 10 per cent - double the rate of six years ago.

The interest rate increases have required many borrowers to make changes to household budgets and spending patterns. These rising payments have also coincided with fluctuating petrol prices and rising grocery prices. These factors combined have contributed to a softening of the housing market with a reduction in the number of sales and a stabilisation of price throughout the first half of 2008.

Many economic indicators, including the REIV’s June Quarter data show that the Reserve Bank’s monetary policy decisions are taking into affect, the result being an economic slowdown.

A reduction in the official cash rate, if passed on to mortgage holders by private banks and other financial institutions , would help alleviate some of the financial stress households are experiencing and provide mortgage holders and future first home buyers with some respite.

A lower interest rate would also help stimulate investment in the private rental market. This would then help to provide prospective tenants with more choice and also stabilise rents

 

Source: REIV

 

 

 

 

Tags: interest rates

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