If record low interest rates lead to skyrocketing housing prices, leaving new buyers in a state of negative equity, or risking excessive debt, RBA and APRA are also prepared to tighten loan standards. According to documents obtained by The Times and the Sydney Morning Herald under the Freedom of Information Communication Act, as early as the end of November, the RBA had considered issues related to interest rate policy, including the impact on depositors and asset prices.
RBA lowered the official cash rate to a historical low of 0.1% last year, and carried out a quantitative easing program to offset the impact of the new crown economic recession. RBA President Roy (Philip Lowe) said he does not expect to raise interest rates for at least three years. CoreLogic data shows that despite the deepest economic recession since the 1930s, Sydney house prices have risen by 4% in 2020, approaching more than A$1 million. The median house price in Melbourne fell moderately by 2% to below A$800,000. The document cited previous research by RBA economists showing that a permanent reduction of official interest rates by 1% can boost real housing prices by 30% within three years. A “temporary” rate cut of 1% will push up real house prices by 10%.
Another winner of low interest rates is the federal government, which also supports government borrowing and economic recovery. “File found.
https://www.smh.com.au/politics/federal/rba-says-low-rates-will-push-up-house-prices-20210116-p56um9.html