The cash rate has remained at its record low setting of 0.25% since March 20th when the RBA announced a raft of monetary policies aimed at supporting liquidity and lowering funding costs. At the time, and numerous times since then, the RBA has reiterated the cash rate won’t increase until such time that ‘progress is being made towards full employment and the RBA board is confident that inflation will be sustainably within the 2-3 percent target band’. Both these factors remain a long way off, with unemployment expected to peak around 10% later this year and core inflation trending lower to be well below the 2% lower bound of the target range. The low cash rate has helped to bring mortgage rates down to record lows; new loans for owner occupiers are attracting an average variable mortgage rate around 2.7%, with fixed rates even lower.
Such a low cost of debt has been a key factor in supporting housing demand and helping to insulate housing values. Through the pandemic to date, housing values nationally have slumped by only 2.0% and housing activity has trended only about 5% lower than a year ago over the past three months, .
With the cash rate likely to remain on hold for the foreseeable future, home buyers have greater certainty around their housing costs. However household certainty around factors such as employment and income remains low due to recessionary conditions and the uncertainty related to the coronavirus. For people with confidence in their own financial circumstances and household balance sheets, arguably this is a good time to be considering a home purchase thanks to the low cost of debt and certainty that rates will remain low for at least the next few years.