Potential cash rate cuts among rising interest rates

22.11.13The official cash rate was reduced by the Reserve Bank of Australia (RBA) to a historically low level of 2.5 per cent back in August. Since then, interest rates have been lowered to match the change and confidence in the housing market has soared.

Incidentally, many industry bodies have been wondering about the longevity of these rates, with the general consensus being a return to higher levels in the coming months. However, the minutes from the latest RBA Board meeting have suggested that further cuts could be on the horizon.

For example, the financial comparison website RateCity have recently collated research that has indicated 85 lenders across Australia are expecting the cash rate to rise in the coming months. This has resulted in a number of them beginning to increase their interest rates.

Chief Executive Officer for RateCity Alex Parsons said the usual five year fixed rate loans were the first to change, with the shorter term loans following suit. He said that while they’re still well below long-term averages, it could pay to be aware of the increases.

“We know fixed rates usually start to rise well before variable rates, and borrowers often miss the lowest point. After all, the banks have a far better chance of predicting future rate movements than the average borrower,” said Mr Parsons in a November 8 statement.

By the same logic, MortgageChoice spokesperson Jessica Darnbrough said that with the Australian economy being continually strong at the moment, there was no need for further rate cuts.

She cited the recent reduction in unemployment – which fell 0.1 per cent to 5.6 per cent – and increasing consumer confidence as evidence that the Australian economy was well on its way to recovering.

“This positive data shows the Australian economy is performing very well at the current time, so it was unsurprising to see the Reserve Bank leave the cash rate untouched at the historically low level of 2.5 per cent,” said Ms Darnbrough in a November 5 statement.

Ms Darnbrough recommended that anyone considering entering the property market at the moment would be smart to do so before interest rates and property prices begin to rise on the back of an increasing cash rate.

However, the minutes from the most recent RBA meeting have highlighted the strong Australian housing market.

They praised the improvements seen in all areas of real estate – from established homes to building approvals – and said that while the cash rate is resting steady at the moment, they would not “close off the possibility of reducing it further should that be appropriate to support sustainable growth in economic activity”.The official cash rate was reduced by the Reserve Bank of Australia (RBA) to a historically low level of 2.5 per cent back in August. Since then, interest rates have been lowered to match the change and confidence in the housing market has soared.

Incidentally, many industry bodies have been wondering about the longevity of these rates, with the general consensus being a return to higher levels in the coming months. However, the minutes from the latest RBA Board meeting have suggested that further cuts could be on the horizon.

For example, the financial comparison website RateCity have recently collated research that has indicated 85 lenders across Australia are expecting the cash rate to rise in the coming months. This has resulted in a number of them beginning to increase their interest rates.

Chief Executive Officer for RateCity Alex Parsons said the usual five year fixed rate loans were the first to change, with the shorter term loans following suit. He said that while they’re still well below long-term averages, it could pay to be aware of the increases.

“We know fixed rates usually start to rise well before variable rates, and borrowers often miss the lowest point. After all, the banks have a far better chance of predicting future rate movements than the average borrower,” said Mr Parsons in a November 8 statement.

By the same logic, MortgageChoice spokesperson Jessica Darnbrough said that with the Australian economy being continually strong at the moment, there was no need for further rate cuts.

She cited the recent reduction in unemployment – which fell 0.1 per cent to 5.6 per cent – and increasing consumer confidence as evidence that the Australian economy was well on its way to recovering.

“This positive data shows the Australian economy is performing very well at the current time, so it was unsurprising to see the Reserve Bank leave the cash rate untouched at the historically low level of 2.5 per cent,” said Ms Darnbrough in a November 5 statement.

Ms Darnbrough recommended that anyone considering entering the property market at the moment would be smart to do so before interest rates and property prices begin to rise on the back of an increasing cash rate.

However, the minutes from the most recent RBA meeting have highlighted the strong Australian housing market.

They praised the improvements seen in all areas of real estate – from established homes to building approvals – and said that while the cash rate is resting steady at the moment, they would not “close off the possibility of reducing it further should that be appropriate to support sustainable growth in economic activity”.

Leave a Reply

Your email address will not be published. Required fields are marked *