Mortgage rates to stay low for the next decade, says mortgage broking network

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Homebuyers need not worry too much about mortgage interest rates as 1300HomeLoan, a leading mortgage broking network, predicts that mortgage rates are going to stay low for a decade. In fact, 1300HomeLoan managing director John Kolenda predicts that the current 1.75 per cent official rate will be the “new norm.”

“We are unlikely to see official interest rates move to pre-global financial crisis (GFC) levels and the standard norm of the future will be lower than historical levels for the next decade,” he said.

The Reserve Bank has sliced its cash rate to a record low of 1.75 per cent last month over fears regarding inflation. Prices have been dropping for several months across the country. Because of this, consumers are now more sensitive to the impact of higher interest rates that taking them back to what was once considered normal could hurt them.

“The monetary policy game has changed and the RBA has found cutting its cash rate is not necessarily an instant remedy for economic stimulus,” Kolenda said. “Conversely, any time the RBA increases official rates in the future could have a disastrous impact on consumer confidence and the economy. Consumers are now very rate-sensitive and when they rise, they are likely to stop spending and revert to saving.”

Kolenda also said that there is a possibility that the Reserve Bank will cut rates again, in sync with the expectations of many analysts that another rate cut might be in the cards by the end of the year.

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