Interest rate pause having an impact

LAST week the Reserve Bank of Australia (RBA) made the decision to pause interest rates. This comes after the past few months of 10 interest rate rises hitting homebuyers, businesses, investors and renters dearly. After the sharpest interest rate hikes in decades this year, there are signs that inflation is now stabilising or declining. The RBA's aim for the interest rate rises was to slow the inflation rate down – as it believed Australians were heading into another recession. At the start of 2023, Australia saw the potential signs of a slowdown in employment as the rate and hours worked decreased while underemployment increased. But the impacts of the rate rises were felt more across the housing and real estate industry. Local real estate agent John Stringer of Nutrien Ag Euroa, said the rate rises had already seen an impact on first home buyers, homebuyers in general, and sellers. "When the interest rates were low, first home buyers were given the opportunity to buy houses with less deposit," Mr Stringer said. "Now the interest rates have surged they have found a huge jump in repayments on their mortgages. "First home buyers were able to borrow the maximum amount at low interest, but now there will be a big impact for them. "This impact will affect home buyers and sellers across the state. "You can expect to see a lot of homes going up for auction – mortgagee sales as homeowners with huge mortgages to pay off will not be able to keep up the payments." Mr Stringer said house prices have also been affected along with sales. "Where there had been a surge in prices, that surge and higher, good prices for homes has flattened out," he said. And some have come down in estimated sale prices – not like during the pandemic when house prices went up considerably. "Where home sellers were expecting top prices, this will not happen now and it is expected to take a little longer for homes to sell as buyers may have to find suitable finance," Mr Stringer said. Amid a difficult economic climate, the building and construction industry welcomed the Reserve Bank of Australia's decision to pause interest rates. "Interest rate rises coupled with rising inflation have forced building and construction activity and new homes sales to slow sharply over the last few months," Master Builders Australia CEO Denita Wawn said. "A strong building industry is the foundation of a strong economy. "The close interdependence between the health of the construction industry and the economy's fate is clear to see in the current environment. "The RBA has rightfully recognised the negative impacts of rapidly rising interest rates on accelerating rental prices and construction activity. "There is now an opportunity for government to step up with bold fiscal policy decisions to complete the job of bringing inflation back into line. "We hope governments do not miss this moment for reform in upcoming state and federal budgets. "There is no silver bullet; this will take a concerted effort by all levels of government working in collaboration with industry." Peak industry body the National Retail Association (NRA) has also welcomed the Reserve Bank of Australia's (RBAs) decision to pause rate increases this month, allowing retailers to sleep easier. NRA CEO Greg Griffith said the cash rate currently sits at 3.6 per cent after a debilitating 10 consecutive rate hikes that put several small retailers at risk of closing down. "The cost–of–living crunch has weighed heavily on consumer sentiment, and the industry is thankful the RBA has put down its hammer long enough to assess the full impact of its monetary policy," Mr Griffith said.