Homeowners warned not to bank on a rate cut

Mortgage holders and hopeful home buyers have been warned against banking on an interest rate cut.

Auctioneer Brad Heffernan of Adrian WIlliam Real Estate. Picture by Max Mason-Hubers

Mortgage holders and hopeful home buyers have been warned against banking on an interest rate cut as the property market boost from February’s cut appears already to have run its course.

Just over 2900 homes went to auction at the weekend, the highest level since late-­October, but only two-thirds found a new owner as clearance rates slipped for a fifth week in row.

Despite the Reserve Bank cutting the cash rate for the first time in four years in February,

HSBC chief economist for Australia, New Zealand and global commodities Paul Bloxham. Picture: Darren Paterson

HSBC’s chief economist for Australia, New Zealand and global commodities, Paul Bloxham, warned Australians not to expect another cut soon or a major boost to prices.

Most economists expect no change when the monetary board meets on Monday and Tuesday.

“The RBA interest rate cut we saw in February has added a bit of support to the housing market, a floor under a housing market that was starting to cool,” Mr Bloxham said. “We have the next rate cut pencilled in for the third quarter of this year ... but the caveat at the moment, or the thing that we need to watch most carefully, is global developments.”

CoreLogic research director, Tim Lawless, expects the next cut may ring through in May but he noted last month’s market boost was short-lived.

“It looks like there was an initial boost to selling conditions (but) values from the rate cut in February seem to be wearing off,” Mr Lawless said. “I’d probably just put that down to the realisation that, or the acceptance maybe that the rate cutting cycle is going to be a very cautious and gradual one, and we still have some headwinds around affordability.”

SQM Research managing director Louis Christopher expects the federal election will impact buyer decision-making over the coming weeks despite housing policy being not yet emerging as a key campaign issue.