Good news homeowners! 1% RBA cash rate just around the corner
If predictions by NAB ring true, Australian homeowners could see their mortgage rates drop even lower when we enter the new year.
The big bank is tipping that the official cash rate, which the RBA slashed to 1.50% this month will drop two more times by 25 basis points in May and August 2017, bringing it to a new low of 1%.
If we take the average home loan rate currently in Mozo’s home loan database at 4.49%, and assume a homeowner with a $500,000 mortgage receives both 0.25% rate cuts by their lender, this rate reduction would save the borrower $52,135 in interest over a 30 year period.
According to the major bank two rate cuts of 0.25%, “should be enough to stabilise the unemployment rate (which is currently a concern for the RBA) at just over 5½% and prevent economic growth from dropping below our forecast of 2.6% (average) in 2018.”
“Although we are not as quiescent as the RBA with respect to house prices, nor are we convinced lower rates will have a material impact on inflation, we do expect the RBA will react by providing further support,” NAB explained in a statement.
The big bank is forecasting that in the near term, we will see a reasonably “solid economy”, with strong growth in residential construction, however, this construction cycle may see a downturn in 2018.
“The risks to the outlook going into 2018 are becoming increasingly apparent, as LNG exports flatten off at a high level and the dwelling construction cycle turns down.”
“Consequently, NAB’s forecasts for GDP growth are factoring in more headwinds going forward, widening the spread between NAB and RBA forecasts to around 1½ ppts by late 2018 (NAB forecast 2.2% over 2018 vs RBA’s 3-4%).”
Mozo will be watching the market to see how the economy spans out and reporting on any movements in the home loan world. In the meantime, if you’re currently in the market for a new home loan, visit Mozo’s comparison hub to compare deals side by side.