3 major banks changed their interest rate forecasts

It’s that time of the month again and the Reserve Bank is tipped to keep the cash rate at 2.50 percent when it meets on Tuesday.

However while the finder.com.au monthly Reserve Bank Survey of 25 leading experts all expect no change to the cash rate, 24 experts predict rates will rise next year.

While one expert (Nicki Hutley from Urbis) expects the cash rate could rise by the end of this year or just after, which was slightly changed to her previous forecast in last month’s survey, from the last quarter of 2014.

Interestingly, four other experts – including three from the major banks – have also changed their forecasts from last month.

What the experts think:

Alan Oster from National Australia Bank made the biggest jump from last month’s survey, from an expected cash rate rise in the first quarter of 2015 to now forecasting the cash rate won’t move until the fourth quarter of 2015.banks

Shane Oliver from AMP changed his forecast from the second quarter of 2015 to the second half of next year.

Michael Blythe from Commonwealth Bank now expects a cash rate rise in the first quarter of 2015 after his last forecast was by the end of this year.

Warren Hogan from ANZ previously predicted a rate rise in the first quarter of 2015 and now expects rates will rise in the second quarter of 2015.

Insights from the latest finder.com.au monthly Reserve Bank Survey:


The survey showed mixed results for when the cash rate is likely to rise, with 40 percent (10 experts) expecting hikes in the first half of 2015 including ANZ, BetaShares, Commonwealth Bank, Commsec, HSBC, ING Direct, ME Bank, Resi Home Loans, St George Bank and UBS.

While 52 percent (13 experts) are betting on the second half of next year including AAP, AMP, Bank of Queensland, Bank of Sydney, Heritage Bank, FXCM Australia, Moody’s Analytics, NAB, Property Observer, Financial Services Council, RAMS, Greater Building Society and Westpac.

Just one expects a rise by as early as December 2014 (Urbis), and one did not specify which half of next year (State Custodians).

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Michelle Hutchison, Money Expert at finder.com.au, said this mortgage season is looking to be a frenzy of borrowers looking to build new homes.

“There’s a growing trend of borrowers ditching established homes and building their dream home, with the number of home loans for new properties up by 40 percent and construction loans has increased by 15 percent compared to five years ago, while home loans financed for established properties dropped by 3 percent.

In the past 12 months to June 2014, there were over 33,000 new home loans financed compared to about 24,000 in the year to June 2009.

There were more than 70,000 home loans financed for construction in the 12 months to June 2014 compared to 61,162 for the same period five years ago. While established home loans financed for the year to June 2014 dropped by almost 14,000 compared to five years ago, from over 530,000 in the 12 months to June 2009 to about 516,000.

Most states are offering government incentives for building new homes including ACT, New South Wales, Northern Territory, South Australia and Tasmania.

Not only are first home buyers being rewarded with up to $30,500 but existing borrowers are also being incentivised to build their next home with up to $17,000, depending on which state you live.

“So it’s not surprising that the property market has turned to house and land packages, new homes and land sales while existing property purchases are dropping.

“The demand for land and new homes is driving up the prices in some areas so make sure you do your research on whether buying or building is the best option this mortgage season, and look into the different types of home loans available to suit your plans,”

State Government Incentives:



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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au

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