Now that we’ve all had a chance to absorb the fact that our record low interest rates have now gone even lower compliments of the Reserve Bank’s move this month, I thought it was worth looking ahead to see what the future may hold.
Obviously, there are quite a lot of mortgage holders who are wondering whether now is the time to consider locking in the rates on at least part of their loan, or whether there are more cuts still to come. So we took a look at what the economic gurus have been saying since the August rate cut.
Westpac’s head economist, Bill Evans, was the first to tip the current easing cycle, and has been remarkably accurate in his forecasting of the cuts to date. So I tend to pay attention when he speaks.
Mr Evans is saying that that we still have another 2 cuts to come, taking official cash rates to just 2%, including one more cut this year.
In fact, Bloomberg’s regular survey of leading economist forecasts found that 9 out of the 28 surveyed were predicting another rate cut before the end of 2013. This included Macquarie Research which is forecasting another 2 cuts in the next four months.
There are several other forecasters, of course, who feel that rates may well remain stable now for quite some time. However, perhaps the best news for longer term stability came from the ANZ’s Ivan Colhoun who is quoted as saying, “Based on the trend for these series, the pressure on Australia’s cash rates remains downward and there remains very little prospect of any rise in cash rates before 2015.”
So my best advice on fixing interest rates is this. Never forget that the Banks are paying a lot of very expensive, well qualified actuaries to work on the numbers before offering any fixed rate loans….and the Banks are not renowned for giving away money cheaply. So with the Banks offering both fixed and variable rate loans well under 5% now, I think it’s safe to assume that the Banks clearly think rates won’t be going up for quite some time to come.