Buyers celebrate Cup Day cut

Now that COVID restrictions have relaxed, the race is on to make up for lost time with buyers and sellers keen to sign on the dotted line.
04-11-2020
The Reserve Bank of Australia has given property punters all over Australia a reason to celebrate, cutting interest rates by .15%.

The cut takes the official rate to an historic low of just .10% and predictions are it will stay there for the next three years.

It is the first time the bank has adjusted rates since March.

The Cup Day cut signals a big win for home buyers says KR Peters Director Peter Nicolls.

Mr Nicolls said even a slim .15 per cent cut, if passed on in full by the banks, will save borrowers thousands of dollars over the life of their loan.

"The majority of home buyers are borrowing 90% on the purchase of their new home. That means on an average $600,000 home, the loan is $540,000. A reduction of .15% represents a saving of $810 a year."

Mr Nicolls said owner/occupier loans are currently at around 2.99% and investor loans at around 3.5 %.

"A further interest rate reduction by the Reserve Bank will basically see term deposit accounts at near 0% interest rates."

Mr Nicolls predicted a swift rebound in property prices as buyers are freed from strict COVID lockdown and no longer have reason to delay purchasing property.

"We are getting more enquiries in one day than we had for two months. It seems like the tap has been turned on and home buyers are back."

So hot is demand that KR Peters decided to bring forward by a month the date of an auction in Bayswater such was buyer interest.

A 44 year industry veteran, Mr Nicolls can't remember the last time he brought forward an auction due to overwhelming buyer demand.

He says demand has been buoyed by a combination of low interest rates and a relaxation of borrowing criteria by the major banks.

"My biggest concern with buying and selling property was the ability for home buyers to obtain finance. Essentially, the banks work off a rate of 6.5% which is called the buffered interest rate. Although the RBA may drop the cash rate, the banks will still work off 6.5% to determine affordability," Mr Nicolls explained.

"The reason for this is that over the course of a 30 year loan, the rate is unlikely to remain so low, with 6.5% the long-term average of the loan."

He said Federal Government pressure had forced the big banks to "open their doors for business" and start lending.

And now that COVID restrictions have also relaxed, the race is on to make up for lost time with buyers and sellers keen to sign on the dotted line.

"We have two months to make up for all the lost sales during the year and we intend to finish the last two months of the year with a swag of sales."