Re: Have we reached the bottom of the interest rate cycle?

Posted by Simon Dehne on February 10, 2014 in Latest News with No Comments

Last Tuesday, the RBA (Reserve Bank of Australia) met for the first time this year. The good news was RBA did not increase interest rates. But what does this really mean? Governor Stevens announced that the official rate would be held unchanged for an extended period. Although, the media picked this up as a message that interest rates would not be reduced for the foreseeable future the more important message that Governor Stevens was telling the market was that interest rates were not going to be increased.

Why because they expect inflation to rise and even edge close to the inflation ceiling that the reserve bank has set. If the RBA had not explicitly ruled against rate increases these inflation forecasts would have immediately sparked speculation of when and by how much interest rates would rise by.

So this is the clearest sign by the RBA that rates are on hold for the foreseeable future and in fact Governor Stevens said “the most prudent course is likely to be a period of stability in interest rates”, all but signaling that the big falls in rates of the past few years are over.

This could see vendors who have been holding off on putting their property on the market in the hope of further rate reductions now consider listing.

This could see the upsizers and downsizers deciding there is no point in waiting in the hope of seeing another property boom because of even cheaper rates.

So a key message for the borrower is interest rates maybe at the bottom of the rate cycle, the property market has a steady supply of stock and the banks are offering very competitive deals for home loan borrowers.

So whether you are buying or refinancing now is a perfect time to compare.

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