Interest rates held at 2.5 per cent
The Reserve Bank of Australia has once again held interest rates steady at 2.5 per cent which is good news for those seeking mortgages or making home loan repayments. The low rate, in place since August 2013, reflects the RBA’s policy of stability in interest rates while the economy moves away from growth fuelled by mining. Governor Glenn Stevens’ statement says that the central bank expects inflation to meet targets with wage increases moderate. He notes that low interest rates create competition in lending and although credit growth is moderate overall the housing sector is attracting investors and prices for dwellings continue to grow.
Economist predicts rates could go lower
Although many believe that the only way for interest rates to move is up, one is forecasting that they could drop further from their current 60-year low. Senior economist from the Domain Group, Andrew Wilson tells the Sydney Morning Herald that the current cocktail of house prices, building approvals, unemployment and stock market volatility, he believes that a cut in rates is more likely than a rise. He says that if the jobs market stays weak then we could see rates cut in March. The current consensus is for a rate rise in August 2015.
Interest rates are pushing lenders to be more competitive
Banks are becoming increasingly competitive in a bid to attract new home loan business. While low interest rates have seen most mortgage products fall in price, banks have been making exceptional cuts in some instances desperate to attract new business. Fixed price home loans and variable rate products have all seen reductions from lenders in the last few months and the market is set to remain highly competitive with the likelihood of around 10 more months of lower rates from the RBA.