But will the Reserve Bank cut interest rates?

Wednesday 23 January 2013

Article by Mozo

Interest rates are currently a raging discussion amongst economists, bankers and especially those with home loans. The latest speculation is that lower than expected inflation will give the Reserve Bank plenty of room for further rate cuts in the upcoming months.

Question mark and exclamation mark asking will the interest rates be cut on home loans

The Consumer Price Index only saw a rise of 0.2 percent last December, below the expected 0.4 percent that economists had predicted. And according to the Australian Bureau of Statistics the annual inflation rate sat around 2.4 percent which was in the middle of the Reserve Bank's expectations of between 2 to 3 percent.

There were a number of price rises last year according to the ABS. A rise of 6.2 percent on domestic holidays, a 2.6 percent increase on petrol and 7.7 percent for health care. There was also a drop in price for vegetables by 5.7 percent as did audio visual and computing both by 4.3 percent.

This all adds up to a good possibility of a rate cut. According to Su-Lin Ong from RBC Capital Markets "It increases the risk of a rate cut, because inflation is coming in lower than what the RBA had forecast and because it is in the bottom half of the target range and very well behaved," he said.

While it is uncertain if there will be another interest rate cut and exactly when it would be, one thing that is certain is that from first home buyers to experienced property investors, all eyes will be watching interest rates closely in the upcoming months. Potential buyers should however remind themselves a home loan comparison is the best way to find the best interest rates on the market.

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