EXPECTATIONS that the Reserve Bank of Australia (RBA) will keep interest rates on hold again when it meets for the first time in 2006 are setting the scene for increased activity in the property market this year. Resi's national manager for consumer advocacy Lisa Montgomery said last year was a period of consolidation for home buyers.
"But activity was picking up considerably in the last few months of the year, particularly as more first-home buyers decided they were finally comfortable to take the plunge," she said.
Seven out of 13 economists surveyed by AAP believe that rates are likely to remain on hold for the first half of this year.
Citigroup Global Markets co-director and strategist Stephen Halmarick said rates are most likely on hold through all of 2006, however, the risk to that forecast would be one rate hike in the second half of the year.
"But even with one increase, it would still leave rates low and steady by historical standards," he said.
"Debt to income levels are still relatively elevated and interest rates have a pretty big impact on household balance sheets, so steady interest rates is obviously a plus for people looking to borrow money."
Over the past 10 years the average standard home loan rate was 7.2 per cent, according to the RBA. But the decade before that, rates averaged 13 per cent for the same standard home loan.
"Conditions can change but the Australian economy seems to be favouring home buyers at the moment," Ms Montgomery said.
Mr Halmarick said with the unemployment rate remaining very low, that would support a better environment for potential home buyers.
"That is a key factor for home ownership, that the labour market continues to look pretty solid,'' he said.
Ms Montgomery said while it is not likely to see the market run red hot, steady rates are making a noticeable difference and she expects more activity in the property market this year.
However, she warned that it is very important that home buyers "do not get in over their heads".
"If you are taking out a home loan it is always important to make sure you can still afford the repayments even if interest rates rise by as much as 2 per cent," she said.
"Home loans normally run for far longer than a year and it pays to have a buffer zone in place."
The RBA holds its monthly board meeting on Tuesday.
The RBA's steady position on interest rates over the past 10 months is providing an important confidence boost for first-time home buyers and investors who in the past were scared off by a cocktail of rising property prices and rate rise fears, said Resi Mortgage Corporation.
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