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Low inflation means continued low interest rates

By James Brown

Before being cut by 25 basis points in February, the Reserve Bank of Australia (RBA) held the cash rate for a whole 15 months – one of the longest periods of interest rate stability in modern Australian history. Since then, many have wondered if we would see a comparable period of stability in the near future – or, indeed, if the cash rate would even stay as low as it has. 

The June 2015 quarter consumer price index (CPI) figures seem to suggest this will be the case, which should be encouraging for anyone hoping to buy property in Morayfield, Narangba and surrounding areas. 

While the RBA has set an inflation target zone of 2-3 per cent, the CPI rose by an annual rate of only 1.5 per cent. This bodes well for future cash rate decisions, as inflation is one of the key factors the RBA board takes into account when setting the rate. 

Neville Sanders, president of the Real Estate Institute of Australia was positive about the decision, noting that "this should translate into a sustained period of low interest rates and be good news for home owners."

He went on to say that with these inflation figures, coupled with a slow down in the rate of housing finance, it was "reasonable to expect" that the board would keep interest rates low in the medium term. If you own real estate in Narangba or other areas of the Moreton Bay region, this means the cost of your mortgage may stay stable for some time to come. 

It's a good time to be a home owner, if these conditions continue – and so far, there's nothing to indicate that they won't. Whether or not interest rates will get lower, however, is another story. We'll have to wait and see.

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