If the forecasts come true, Australian homeowners will finish the entire 2014 without a single change in the rates.
According to ME Banks General Manager Markets John Caelli, the Reserve Bank of Australia (RBA) is forecast to hold the cash rate at 2.5% for December.
He continues, the RBA is not worried about inflation, and both unemployment and the dollar are still at high levels.
The country’s inflation rate is 2.3%, well within the RBA’s aim of 2 to 3%. Data from the Australia Bureau of Statistics for October 20134 show that unemployment 6.2%, unchanged from the September 2014 figures.
Little change is anticipated, so it may be months before homeowners see rates move. And when they do, Caelli predicts an upward movement. Caelli says “The next cash rate change will likely be upwards and occur in the second quarter of 2015. The cash rate will possibly peak at 4% in 2016 and then begin a downward cycle in 2018.”
RBA governor Glenn Stevens reported in a speech to the Committee for Economic Development of Australia that the country’s economy growth was sluggish in the aftermath of the slowdown in the mining sector.
With the end of the resources boom, Steven cautioned that economic growth would be bearish.
According to Housing Industry Association chief economist Harley Dale, Australia’s economy would have performed worst if not for the record number of houses constructed this year.
Dale says, “Below trend economic growth and weak labour market outcomes would be considerably worse without the reach a new home building recovery is exerting into the broader economy. In aggregate, we will commence nearly 190,000 new dwellings in
2014, surpassing the previous record of 187,000 back in 1994.”
Interest rates may hold still well into 2015, but homeowners should be aware that the stability experienced in 2014 may be absent.
It would be unwise for Australians to budget based on the continuing low interest rates, said MLC financial planner Michael Miller. He says,” Just because it happened in the past 12 months doesn’t mean it will happen in the next 12 months.”
Miller advises that people who would not be able to cope with a future interest rate increase should think about mending their rates.
He continues, “If you can’t afford a rate rise of half a per cent, then you should fix. Don’t fix because you think rates will go up, fix because you can’t afford them to.”