Are further interest rate cuts likely?

Monday 25 February 2013

Article by Mozo

It seems home loan owners will be playing a game of 'wait and see,' as to whether there will be another interest rate cut this year. 

Reserve Bank statement and effect on home loan owners.

In his statement to a parliamentary hearing, Reserve Bank Governor Glenn Stevens stated that there was an improved sentiment towards the outlook for Australian households. Despite many claims of households currently being very cautious, the actual measures of confidence have in fact shown an upward trend since the middle of last year. Mr Stevens also said the RBA's expectations are that consumer demand will record growth in line with the trend of income over the coming period.

It is now expected that another interest rate cut is not likely to occur until at least around June or July. A rate reduction as early as next month was seen as only a one in three chance by the futures market yesterday and a small but growing amount of economists are even starting to believe that unless one of the world's three major economies should fall into deep recession, interest rates in Australia may have gone as low as they will, reported the ABC.

"I think that borrowers are paying approximately what we feel is the appropriate rate for the economic circumstances," said Mr Stevens.

However, it has been suggested that the major bank's may be in position to start a cycle of self initiated rate cuts, although this is not expected for at least another 6 to 9 months, according to news.com.au.

But Mr Stevens did say that housing investment is expected to strengthen with current low interest rates and rising house prices, although we are in the early stages of the trend.

Whether the Reserve Bank makes any further cuts this year or major banks begin self initiated interest rate cuts, Australian home owners do not need to wait to reduce the interest repayments on their mortgage. A home loan comparison can find variable rates already as low as 5.09% and even 3 year fixed rates starting from 4.89%.

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