Interest rates are likely to hit a record low of 2.75% soon

Property investors are always keen to know what’s going to happen with interest rates and there’s been a lot of fascinating debate on interest rates over the last few days.

Housing construction hasn’t hasn’t really picked up despite a series of interest rate cuts, labour market demand is looking weak, and today we saw uninspiring December housing finance data from the ABS. In particular first homebuyers seem to be steering clear of buying.

The Reserve Bank indicated in its Statement on Monetary Policy on Friday that:

“The current inflation outlook would afford scope to ease  policy further, should that be necessary to support demand. The Board will adjust the cash rate as appropriate to foster sustainable growth and low inflation.”

Which is a fairly clear indication that inflation is no barrier to another cut.

Little by little is starting to look as though we will see a record low cash rate of 2.75% and the likelihood of that happening on March 5 is deemed by cash rate futures to be 57%.
The one worry that the Reserve Bank may have in the back of its mind is excessive dwelling price growth returning, and no doubt it will be tracking February’s data closely. There is some talk of house prices growing “rapidly” but I’m not so sure about that.
Clearly Sydney and Perth are stronger than some of the other markets.
dwelling
The ASX target rate tracker below shows how rate cut expectations have shifted over recent days and particularly have jumped up today.
 
[sam id=29 codes=’false’]


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Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


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