RBA 'must give homebuyers confidence'

Wednesday 08 September 2010

Article by Mozo

The Reserve Bank of Australia (RBA) may have to keep interest rates on hold for some time before confidence returns to the home financing market, an expert has said.

Yesterday (September 7th), the RBA opted to keep the official cash rate on hold at 4.5 per cent for the fourth consecutive month.

The move comes on the back of a nine-year low in housing finance, with potential property buyers losing confidence in the market.

Speaking to the AAP, CommSec economist Savanth Sebastian suggested that an extended pause by the RBA is required.

"The sustained weakness in housing finance suggests that property prices are likely to consolidate," he said.

"Given that auction clearance rates have fallen and we've seen a general lack of demand, I think it will take the Reserve Bank to remain on the sidelines to give consumers and potential homebuyers confidence to go out there and make purchases."

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