Well the big story this month has to be the Reserve Bank's (RBA) decision to increase the cash rate to 3.25% (an increase of 0.25%). The RBA board in its wisdom decided that Australia didn't need to keep the official cash rate at its historical 49 year low of 3%, and demand for houses, cars, whitegoods, flat screen TV's and all other things retail needs to be tempered.
The world's most profitable banks, our big four banks didn't take very long to lift their rates so mortgages are going to start taking a bit bigger bite out of home owners' household budgets.
All of the experts are saying going forward we can count on more rate increases.
The RBA board is concerned about a real estate bubble and booming house prices and interest rates are one of the few instruments they can use to dampen demand. As we have pretty strong population growth and a quite healthy local economy, we are feeling more confident about South Australia's future (even though we were already confident last time we checked). There is also an undersupply of new housing, so we feel that our market can sustain some moderate rate increases and still have period of capital growth over time.
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