Home » News » The official cash rate has risen from 0.85% to 1.35%
6 Jul, 2022
The official cash rate has risen from 0.85% to 1.35%
The Reserve Bank of Australia decided to raise the cash rate by 50 basis points from 0.85% to 1.35% at its July meeting.
The inflation rate would reach its peak later this year and then return to the 2-3% level the following year
The household saving rate is greater than it was before the pandemic
There are still chances for home buyers
July’s rate increase was the third in three months, and the cash rate is now at its highest level since May 2019.
“Inflation in Australia is high but not as high as it is in many other countries,” says Reserve Bank governor, Philip Lowe.
“Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role. Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices. The floods are also affecting some prices.”
According to RBA’s media release, the inflation rate would reach its peak later this year and then return to the 2-3% level the following year.
Inflation is expected to fall as global supply-side issues continue to ease and commodity prices stabilise.
“Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services.” says Philip Lowe.
The interest rate rise maybe bad news for people holding mortgages if they do not start to plan.
The implications of this rise for the average owner-occupier with $500,000 debt and 25 years remaining will see their repayments rise by $137. The same borrower would have already endured a $333-a-month increase from where interest rates were prior to May 2022.
What has affected the economy over June?
The international economy experienced a difficult period as the Ukraine war escalated in June. Commodity prices skyrocketed, energy and fuel prices rose, together with the increasing inflation, all leading to a global economic downturn.
As the war continues, the cost of food has also increased.
According to the Food and Agriculture Organisation’s (FAO’s) recent study showed that Food Index Prices are at their highest since 1990.
In Australia, we’ve seen a significant drop in consumer confidence as higher mortgage rates and rising living costs have squeezed every household’s budget, which has been worsened by natural disasters.
Food costs rose by about 7% over the previous year and petrol costs are already above $2/ltr nationwide.
On the plus side, the national unemployment rate is at its lowest in 50 years, at 3.9 per cent. Job vacancies and job ads are both at record highs, and the unemployment rate is expected to fall further in the coming months.
This recent increase in minimum wages and uplift in job demand is expected to help increase consumer spending, borrowing, and economic confidence.
June’s Property Market Update
Throughout June, the housing market conditions became more varied compared to previous months.
Growth assessments in Perth, Adelaide, and Brisbane performed best in June. Despite significant growth outside of Canberra, Sydney, and Melbourne, these trends are gradually reversing due to high inflation and rising interest rates.
According to Corelogic, the Home Value Index declined for the second month in a row in June, with the dwelling values across the five largest cities falling by more than 0.8%.
Values declined when there was a decline in consumer confidence, a rise in global unease, rising inflationary pressure, and the first increase in the cash rate since 2010.
“More recently, surging inflation and a rapidly rising cash rate have added further momentum to the downwards trend. Since the initial cash rate hike on May 5, most housing markets around the country have seen a sharper reduction in the rate of growth” Tim Lawless CoreLogic Research Director said.
Vacancy rates are at an all-time low of 1%, making it harder for people to get into rental housing. This, in hand with recent land restrictions, has brought down the entire housing supply.
Rents rose 0.9% nationally in June, bringing the annual growth rate to 9.5%. This is the fastest yearly growth rate seen since December 2007, when record-high levels of immigration into Australia increased demand for rental properties.
“Such strong rental conditions through the current cycle have occurred largely in the absence of overseas migration, although the reopening of international borders is likely now adding further upwards pressure on rental demand,” Tim Lawless CoreLogic Research Director.
There is still hope for home buyers!
For first-home buyers and owner-occupiers
At the same time as interest rates rise, term deposit and savings account rates are starting to increase.
The household saving rate is greater than it was before the pandemic, and many households have built sizeable cash reserves and are now reaping the benefits of faster income growth.
Plus, a cooling market can be a good sign for buyers who might struggle to compete in the property markets, such as first-time home buyers or those on a tight budget.
As there will be less competition in the market, they will have more options and a better chance of obtaining the best deal.
For property investors
Despite the recent rise in inflation and interest rate, the housing market remains stable and a safe haven for investors.
Last month, the Australian property market was valued at $10 trillion. NSW accounts for 40% of Australia’s total value of homes, for a total value of $4.1 trillion. Followed by Victoria and Queensland at $2.7 trillion and $1.7 trillion, respectively.
Furthermore, construction in three sectors across the country, housing, apartments, and commercial, all fell in June due to labour shortages, supply chain issues, and ongoing interest rate hikes, according to The Australian Performance of Construction Index released earlier this week.
New building activity is expected to slow further over the next three months. Together with the Interest rates rising and decreasing vacancy rate, this will have a knock-on effect on the rising costs to rent, meaning now is the right time to invest.
So even though the falling trends are spreading throughout the housing industry, the increase in demand, rising incomes and limited supply may help somewhat reduce the risk.
Get ahead of the property market!
Despite rising cash rates, affordable home is still within reach. There are many suburbs across Sydney where you can buy for under $500k and secure today’s interest rates before the further rise.
If you’re still uneasy about where or what to buy, buying off the plan might be a great way to get ahead of the increasing inflation.
St Trinity Property Group and its affiliated entities, representatives, agents and related companies (collectively referred to as ST TRINITY PROPERTY GROUP) respect the privacy and security of your Personal Information, as defined below, and comply with the requirements of the Australian Privacy Principles under the Privacy Act 1988 (Cth).
WHAT PERSONAL INFORMATION DO WE COLLECT AND HOLD?
Under the Act Personal Information is defined as information or an opinion about an identified individual, or an individual that is reasonably identifiable, in whatever form and regardless of whether it is true or not (Personal Information). The Act also defines a subset of Personal Information as sensitive information (for example health records, racial or ethnic origin, religious beliefs, criminal records).
The types of Personal Information we collect and hold will depend on the circumstances of collection and on the type of service we are providing. For example, when we are engaged to sell a property, we may collect and hold Personal Information from both the seller and potential buyers such as name, address, email address, telephone numbers, employment details and details about their business.
HOW WE COLLECT PERSONAL INFORMATION
We may collect Personal Information about you directly when you deal with us over the telephone, send us correspondence (whether by letter, fax or email), have contact with us in person, visit our websites or complete hard copy or online forms.
There are also circumstances where we may collect Personal Information about you from someone else. For example, from:
• Market research companies contracted by us to obtain information so that we may improve and market our services;
• Your employer;
• Other agents and valuers who may be involved in the services we provide;
• Property developers who contract us to market properties;
• Publicly available information and databases;
• Any of the companies within the St Trinity Property Group (both local and overseas);
• and Anyone you have authorised to deal with us on your behalf.
We also automatically collect certain information when you visit our websites or our subscribers receive promotional emails from us via cookies and other tracking technology (such as web beacons), some of which may be capable of personally identifying you. Such information includes the type of browser and operating system you are using, your IP address and how you use our websites.
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We generally collect, hold and use your Personal Information for the purposes for which it is provided to us (which will usually be obvious at the time of collection), related purposes or as permitted or required by law. Such purposes may include:
• Acting as agent for vendors or purchasers in relation to the sale of a property;
• Acting as agent for owners or tenants in relation to the leasing and or valuation of a property;
• Project management services;
• Structured advisory services;
• Town planning services;
• Capital allowances services and other consulting services in relation to the property market;
• Administration of our business, such as collection of overdue commissions or outstanding fees;
• Responding to client enquiries and communicating with you from time to time to maintain contact and keep you updated on the services you have requested;
• Forecasting future needs of our services and general quality assurance and training purposes;
• Engaging in legal proceedings and/or enforcing judgments and/or orders;
• Complying with the applicable legal or regulatory requirements and/or orders of competent authorities;
• Providing you with promotional and marketing information, including market research reports, newsletters, event invitations and/or property market information relating to our products and services which we think may be of interest to you; and Any other purpose identified at the time of collecting your Personal Information.
DISCLOSURE OF PERSONAL INFORMATION
We may disclose your Personal Information to third parties as may be necessary for any of the purposes stated in the above section. Such third parties generally include:
Our third party providers, contractors, consultants, agents and/or representatives (such as law firms, banks, financial institutions, insurers, IT providers, mortgage referral services providers and/or wealth management services providers) who provide services to us or on our behalf, including to:
• Conduct valuations;
• Assist with obtaining payment from creditors;
• Operate data centres;
• Conduct market research;
• Provide advice;
• Potential buyers, tenants, conjunctional real estate agents and brokers for the purpose for which the information was collected or for related purposes (for example to complete a transaction on your behalf or provide you with a service that you requested); Anyone you have authorised to deal with us on your behalf;
• Any of the companies within the St Trinity Property Group and their related companies; Government authorities, regulatory bodies, law enforcement agencies, courts, tribunals and/or parties to the legal proceedings where you have consented to this or we are required or authorised to do so by law;
• Debt collection agencies; and/or Any other third parties identified at the time of collection of your Personal Information.
DISCLOSURE OF PERSONAL INFORMATION OVERSEAS
Some of the third parties listed above to whom we may disclose your Personal Information are located overseas. For example:
Our information technology and business process service providers that are located in countries including (but not limited to) the Indonesia, India and Philippines; and Our overseas clients that are located in the same countries as the companies within the St Trinity Property Group.
However you acknowledge that, by agreeing to the disclosure of your Personal Information to these entities outside of Australia, we will no longer be required to take reasonable steps to ensure the overseas recipient’s compliance with the Australian privacy law in relation to your Personal Information and we will not be liable to you for any breach of the Australian privacy law by these overseas recipients. On this basis, you consent to such disclosure.
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We take reasonable steps to ensure that the Personal Information we hold about you is accurate, complete and up-to-date. However, we also rely on you to advise us of any changes to your Personal Information. If you are able to access your Personal Information by logging on to an account you have with us, it is your responsibility to ensure your information is accurate, complete, relevant and up-to-date.
On request we will provide you with access to the Personal Information we hold about you, including for the purpose of correcting or updating that information, unless otherwise required or permitted by law.
There is no charge for making the request or giving the access to your Personal Information. We will deal with your request within a reasonable period after the request is made.
If we refuse to provide you with access we will provide you with a written notice that, at a minimum, outlines reasons for the refusal and the complaints mechanisms available to you.
If you wish to access the Personal Information we hold about you or to update or correct it, you can either do so by logging on to your account (if you have one) or contact us using the contact details provided below. We will require you to verify your identity and specify what information you require.
SECURITY OF PERSONAL INFORMATION
We take reasonable steps to protect any Personal Information that we hold from misuse, interference and loss and from unauthorised access, alteration and disclosure. For example, we implement IT security procedures including password protection, firewalls and site monitoring and we store your Personal Information on a secure server.we store your Personal Information on a secure server.
However, data protection measures are never completely secure and, despite the measures we have put in place, we cannot guarantee the security of your Personal Information. You must take care to protect your Personal Information (for example, by protecting any usernames and passwords). You should notify us as soon as possible if you become aware of any security breaches.
When you register as a member on our websites, you will be given a choice as to whether you want to receive e-mail messages from us, including newsletters, announcements and e-mail communications about our latest news, products or services. To the extent the relevant local law requires us to seek your consent, we will only send such messages to you if you opt-in. If you do not wish to receive direct marketing calls or materials, you may use the unsubscribe facility in the marketing communication or contact our Chief Privacy Officer using the channels prescribed below. Further, as a registered member with us, you can modify your choice at any time by accessing your registered account with us. We will stop using your Personal Information for direct marketing if you so request.
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OUR CONTACT DETAILS
• St Trinity Property Group
• Chief Privacy Officer