AUSTRALIA’S housing boom continues as the Reserve Bank of Australia keeps official interest rates at record lows, although fixed mortgage rates are starting to rise.

The RBA board kept the cash rate and other key policy rates on hold at 0.1 per cent after its recent May monthly meeting.

RBA governor Philip Lowe noted lending rates for most borrowers are at record lows.

“Housing markets have strengthened further, with prices rising in all major markets,” Mr Lowe said.

“Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”

While Australia’s economic recovery during the coronavirus pandemic has been stronger than expected, the RBA board still did not expect to lift the cash rate before 2024.

Mr Lowe said the board will not increase the cash rate until actual inflation is sustainably within its 2-3 per cent target range.

Record low borrowing costs are likely to be in place for a number of years and are a major factor in the housing boom, realestate.com.au director of economic research Cameron Kusher said.

“It’s a very big factor because people still can’t spend money how they would like to with, for example, international borders shut,” Mr Kusher said.

“The low borrowing costs and the likelihood of those low costs for a number of years means that buyers have some comfort and it has undoubtedly contributed to the strong demand for homes and the subsequent price increases.”

Mr Kusher said the level of demand and the volume of sales in the market remained high, although both had eased a little after Easter.

Property prices are tipped to surge by 20 per cent over 2021 and 2022, with economists at the big four banks forecasting gains of at least 10 per cent and as much as 17 per cent this year.

The pace of growth of early 2021 is expected to slow down, particularly next year.

Banks are starting to factor in the likely increase in the cash rate in 2024, a rise in bond yields and higher funding costs after the RBA’s term funding facility ends on June 30.

“I expect we will see fixed rate mortgages continue to rise," Mr Kusher said.

“We know 10-year bond yields have risen and the economic recovery has progressed better than expected."