Has the interest rate-cutting cycle come to an end?

December 18, 2013
Craig Kendall

It seems the Reserve Bank’s (RBA) decision to leave the official cash rate on hold today may mean that further cuts are less likely.

 

The RBA has been concerned for a while about the impact of the high dollar and whether investment would pick up outside of the mining sector, leading many to predict further interest rate cuts in coming months.  However, there are some encouraging signs in the economy that have led the RBA to err on the side of caution and leave the cash rate at 2.5%.

 

The latest Westpac Melbourne Institute Index of Consumer Sentiment increased by 1.9% in November, which according to the Index can be attributed to a number of things including a relatively stable unemployment rate and sound house price growth.

 

Research by RP Data shows house prices rose on average by 1.9% over the September quarter.  This combined with better than expected retail sales in October indicates that areas of the economy which are sensitive to the impact of low interest rates are boosting consumer sentiment.

 

The RBA believes that these areas of the economy should continue to provide good news, although they bear watching, while their concerns about a high dollar haven’t gone away.  [Refer to website below for the RBA Media Release]

http://www.rba.gov.au/media-releases/2013/mr-13-25.html

 

So for everyone who is in the property market, this could be a good time to capitalise on historically low interest rates, before prices go up further.

 

If you would like to know more about your options for getting into a home in the near future, investing in the property market or refinancing to a loan that suits you, contact Craig at craig.kendall@mortgagechoice.com.au or call on 0411 782 440.

 

Image courtesy of jscreationzs / FreeDigitalPhotos.net

 

Posted in: Interest rates

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