Will interest rates go down?
January 29, 2015 / Written by Rich Harvey
By Rich Harvey, CEO, propertybuyer.com.au
First things first: We at Propertybuyer do not have a crystal ball. Predicting exactly what will happen to the interest rates here in Australia can never be done with certainty, as economic conditions can often be so fickle.
However, if you want to buy property in Australia and see some positive cashflow from it, you will need to try and gauge the future. This means taking on board expert advice, like that of a buyers' agent, as well as paying attention to factors that might influence interest. So, what could happen in 2015?
The rates remain the same
Some commentators believe there will be little or no change to interest rates this year. Among these is Louis Christopher of SQM Research, who said in his Boom and Bust report that no change to interest is expected for the majority of the coming year.
Of course, there is a strong precedent for this stability in the Reserve Bank of Australia (RBA). The RBA has not changed the official cash rate since August 2013 now, so some ongoing stability in this primary influencer of interest rates is likely.
This is backed up by a slowing of inflation. Housing Industry Association Senior Economist Shane Garrett noted in a January 28 release that the rate of inflation dropped to 1.7 per cent in the December quarter, largely due to a fall in the price of oil.
"Fewer price pressures in the economy mean that a policy of very low interest rates is both justified and necessary," he said. While this augers well for stability, could it mean interest rates actually fall?
Will there be a rate drop for 2015?
Some banks are predicting a cash rate cut, including ANZ. This could drive interest rates down later in the year. Chief Economist Warren Hogan said on January 15 that due to slowness in GDP growth and most sectors outside of residential property, there would likely be two 25 basis point cuts through 2015. He correctly predicted the fall in inflation, and thinks this will drive the cash rate cut.
This could see interest rates drop down even further, increasing affordability for budding property investors. Signs seem to point to the cash rate remaining steady for February at least, offering investors a little more time to lock in an Australian property investment.
Insight such as this, and more, is what you can glean from working with a buyers' agent. That doesn't just apply to the wider market, either - we have intimate knowledge of local markets that can get your foot in the door for some great property.
