Interest rate to remain on hold: economist

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Dr. Chris Caton, chief economist with BT Financial is predicting that interest rates will remain on hold at 6.25% and says that November's interest rate hike may have been the last for some time. However, he stresses that while he does not believe the Reserve Bank will push interest rates up any time soon, any movement would be upward rather than down as a drop in rates generally only occurs during weak economic times. Dr. Caton is also expecting the housing market to stabilise across the country: "NSW has borne the brunt of the weak housing market, due to over-valued properties and an underperforming economy compared to the national standard," says Dr. Caton. "The adverse effects of two droughts, a post-Olympic hangover and industrial competition from booming states such as Western Australia, should wear off and see the NSW market bounce back slowly. However, investors should not expect a recovery on the scale of the last property boom." Phil Naylor, chief executive of Mortgage and Finance Association of Australia (MFAA), says Dr. Caton's forecast was positive for investors and first homebuyers. "With rents soaring and house prices in most states stabilising, this is an opportune time for those thinking of entering the market or buying an investment property." However, Naylor noted that while the forecast of stable interest rates promises more buying confidence, MFAA members are not seeing increased investor interest in property as yet.

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