Interest Rate Update

Still on our way to 4.99%

Declining Housing MarketSome months ago we flagged our expectation that home loan rates were on their way to 4.99%. Since then the Reserve Bank has delivered 3 cuts to the official cash rate and we now sit at 3%. By the way this is the same level that the central bank moved rates to during the darkest day’s of the GFC. So where to from here?

In Australia inflation is well contained at 2% while recent borrowing figures show the lowest levels of borrowing in 26-years. The two speed economy heavily influenced by the mining sector has slowed and had a huge impact on consumer confidence. House prices, contrary to what agents are telling you, remain static and unemployment is slowly on the increase. Domestic borrowers can now get 3-year fixed loans on home mortgages for around 5.29% but this will move lower over coming weeks.

Global influences will continue to dominate. The US has avoided the “Fiscal Cliff” for the moment by “kicking the can down the road” for another two months but watch out for a ratings downgrade in the weeks ahead as this will play havoc with global share markets. Europe, excluding Germany, still faces major obstacles while China will learn to live with slower levels of growth.

Our prognosis – more interest rate cuts ahead and I forecast that both variable and fixed rate mortgages will move through 4.99%

“By Shane Clinton”

Leave a Reply

Your email address will not be published. Required fields are marked *