Experts believe banks will raise rates, property prices to stay high

Font size :
Eighty percent of the economists and experts who participated in the latest Reserve Bank Survey by are anticipating the cash rate to remain on hold at 2.0% at the Reserve Bank’s meeting on November 3.

The experts mentioned that an immediate cash rate cut to counter the trend of major banks increasing their home loan rates is unlikely. Additionally, the experts noted that the property market’s recent cooling was too early to lead into a rate change.

The survey also discovered that 30% of the participants foresaw a cash rate drop by the end of the year. Of those who answered as such, six further predicted a cash rate fall on Melbourne Cup next week and three participants supposed that the cash rate will drop around December instead.

“Melbourne Cup day is traditionally a popular period to move rates. The cash rate has moved on Melbourne Cup day 10 times since 1991 when the modern adjustment cycle began – down four times, and up six. However, this is unlikely to be the case this year, with 80 percent of experts tipping rates to hold, despite out of cycle rate changes filtering the market,” said Michelle Hutchison, money expert.

Although all four of the country’s biggest banks have increased their owner occupied home loans in recent weeks, the official cash rate is not expected to also increase just yet, a majority of the experts believe. 16 of the 30 experts say that the cash rate will not start to rise until past 2016. One in four experts thinks that the rise will occur instead by the fourth quarter of 2016.

On how low the cash rate would drop until the increase, the opinions of the experts were split. 55% of the experts think the rate will not fall below the current 2.0% and 28% of the participants predict a low of 1.75%. Meanwhile, 17% of the experts believe that the cash rate could fall as low as 1.5% this cycle.

The survey revealed that two in three experts (66%) expect prices to rise or remain high despite increases in home loan rates. Of those who expect price hikes, around 49% expect no change to property prices and 17% assumed that prices will only continue to increase.

Thirty-four percent of the experts predicted a drop in property prices, with the majority of them disagreeing, citing that the market is not strong enough to adapt to the changes without matching the pace of its continued growth.

Seventy-one percent of the experts predicted that out of cycle increases started by Westpac and the other major banks would inspire other lenders to try the same. St George and Macquarie Bank have pending rate rises, bringing the known total number of banks with rate increases to six.

“Some lenders, however, have a tendency to keep their rate rises quiet, which can make it difficult for Australians to keep track of movements in the home loan market. It’s important for borrowers to ask the question when they are speaking to lenders or applying for a new loan to find out if they have recently made any announcements or are planning to. It’s safe to assume that more lenders will follow these banks’ leads by raising their rates too,” warned Hutchison.

“However, some smaller lenders may use this opportunity to win over new borrowers, by not following the big banks’ lead at all, or not raising their rates by as much as the market average. Regardless, it’s a great time to compare rates to see if you can get a better deal – a small change to your interest rate can save you thousands of dollars over the life of your loan,” she added.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney

Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

How many properties should you have in your portfolio? How many properties should you have in your portfolio? To achieve that coveted $100,000-a-year lifestyle, a long-term investment strategy is needed ... Read more

More mortgage news and articles

Sponsored Links

Tuesday, Sep 19, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords