The Reserve Bank of Australia is the banker of the Australian Government. The stability of the currency of Australia is the primary concern of the Reserve Bank. The Reserve Bank works towards the goal of achieving full employment in Australia and achieving economic prosperity for the people of this country. In order to attain low, stable inflation over the medium term, the Reserve Bank will set the official cash rate.

The Official Cash Rate

The Reserve Bank Board makes the policy decisions of the Reserve Bank of Australia. The Reserve Bank Board will decide if there is a need to increase or decrease the official cash rate.

Although the Reserve Bank sets the official cash rate, Australian banks and lending bodies can add to this amount. Usually the amount added to the official cash rate is between 1.8% and 2.5%. The official cash rate plus any increases by the Australian banks and lending bodies is the amount of interest payable when you take out a mortgage. Once you take out a variable rate mortgage, your mortgage will usually rise by the percentage that the Reserve Bank raises the official cash rate.

If the Reserve bank lowers the official cash rate, your lending body will usually decrease your mortgage. Banks and other lending institutions do not always pass on the full amount of the Reserve Bank’s reduction of the official cash rate.

As the Australian economy continues to improve, the Reserve Bank of Australia has increased the official cash rate by 0.25% this month.

Investing in Australia’s Property Market

Investment in the property market is very strong. More property is selling at auction than by any other means. The amount of properties sold at auction this year has increased when compared to the amount of properties sold at the same time last year.

The increase of homes sold at auction is due to the continued growth of the Australian economy and the ongoing need for more housing in this country. At present, the demand for housing outweighs the current supply of homes on the market. Now is the perfect time to invest in property, as there is a great demand for rental properties in all of the capital cities of Australia.

Although the Reserve Bank increased the official cash rate a number of times last year, the average house price continued to rise in the last twelve months in every capital city. The lowest rise this year was in Perth, where house prices rose by 7.1% and the highest rise this year was in Melbourne where house prices rose by 17.6%. Because the demand for housing is higher than the amount of properties that are available, it is likely that prices will continue to rise in every capital city.

The Reserve Bank Board’s decision to increase the official cash rate by a further 0.25% this month will not slow investment in property. The Reserve Bank advised there was a stronger rise than expected in credit provided by financial institutions to the private sector in January. This was the strongest monthly result in the last twelve months.

Housing credit rose by 0.7%. This increase is due to growth in lending to investors and owner-occupiers. Credit provided to the private sector by financial institutions rose by 0.3% in December last year and a further 0.4% in January this year.

The Reserve Bank plays an important part in the economy of this country. The decision of the Reserve Bank to increase the official cash rate by 0.25% this month means Australia’s economy is continuing to prosper. Investing in the property market will help you to ensure your financial future.