Market/Finance News Blog: Where to for interest rates?

By the resi financial blog team, 28 April 2015

Market/Finance News Blog: Where to for interest rates?

Speculation has been rife about the direction interest rates will take. The Reserve Bank of Australia (RBA) has stoked the fire by maintaining the official cash rate at 2.25 per cent at its previous board meeting, but with the next announcement just around the corner, there has been some discussion about whether the board will make good on its promise and trim interest rates further. However, those hoping for a May cut may need to wait a little longer, with the latest consumer price index (CPI) figures from the Australian Bureau of Statistics suggesting that inflation is stable.

The latest release showed the CPI rose 0.2 per cent in the March quarter, with a 1.3 per cent increase overall through the year to the March. The stable result was largely a result of falling fuel costs, which plummeted 12.2 per cent over the quarter. ABS figures show this was the most substantial quarterly decline since December 2008. In fact, over the year to March, fuel prices have dropped 22.5 per cent - the largest decrease since September 1973, when these records began. 

The housing group posted a 0.8 per cent rise over the quarter, driven by new dwelling purchases by owner-occupiers. Rent saw a similar rise, jumping 2.1 per cent over the year to March but increases have been few and far between, according to the Real Estate Institute of Australia (REIA).

REIA said investor demand for these properties is likely to put a lid on any significant rises in rent price. CEO Amanda Lynch noted the 2.9 per cent rent price increase in Sydney over the past 12 months is the lowest recorded since the December quarter 2006. 

"The impact of increased investor activity in the housing sector is flowing through to lower increases in rents," Ms Lynch said in an April 22 release. 

In any case, the overall CPI result indicates inflation is well within the RBA's target zone, meaning they will likely keep interest rates stable for another month. 

"With inflation under control combined with a slow down in housing finance, it's reasonable to expect that the RBA Board will not be increasing interest rates in the medium term, providing a stable outlook for home buyers," Ms Lynch concluded.

With the future looking relatively steady for interest rates, it could be a good time to investigate your home finance options. Get in touch with a loan specialist at resi for more information about the excellent range of home loan choices at your finger tips. 

Categories: Home Loans