Expectations that the Reserve Bank would keep interest rates on hold again when it met this week for the first time in 2006 have set the scene for increased activity in the property market this year, according to a major non-bank lender.
Resi Mortgage Corporation said the Reserve Bank's steady position on interest rates over the past 11 months is providing an important confidence boost for first home buyers and investors who in the past were scared off by both rising property prices and the fear of rising rates.
"Last year was very much one of consolidation for home buyers, who tended to approach the property market with a good deal of caution and one eye on interest rates", Resi's National Manager for Consumer Advocacy Lisa Montgomery said this week.
"However, activity was picking up considerably in the last few months of the year, particularly as more first-home buyers decided they were finally comfortable to take the plunge.
"If, as widely expected, the Reserve Bank leaves rates on hold at its meeting next week, it will be 11 months since they last moved - a sizeable period of time", she said.
"While we won't suddenly see the market running `red hot', steady rates are making a noticeable difference and I think we can expect a lot more activity in the property market this year."
Ms Montgomery said that economic indicators - and particularly recent inflation figures - point to interest rates staying on hold for at least the next few months. The likelihood of any major rate hikes in 2006 also seems low.
"Conditions can change but the Australian economy definitely seems to be favouring home buyers at the moment."
Ms Montgomery said that it is still vitally important that home buyers don't `get in over their heads'.
"If you are taking out a home loan it's always important to make sure you can still afford the repayments even if interest rates rise by as much as two per cent. I don't anticipate that happening this year, but home loans normally run for far longer than a year and it pays to have a buffer zone in place."
