admin-ajax.php

Economists mixed on the future direction of interest rates

What’s next for interest rates?

How is a humble property investor meant to know when economists can’t agree?

16 leading economists and money experts gave their thoughts in a survey conducted by finder.com.au .

While none are expecting the cash rate to change at the Reserve Bank’s board meeting next Tuesday, the respondents were divided on when the cash rate will rise.

More than half of the economists and experts in the survey (nine of the 16 from AMP, ANZ, Bank of Sydney, ING Direct, RAMS, UBS, Heritage Bank, Moody’s Analytics and ME Bank) are forecasting the cash rate will rise next year.

Five respondents from Commonwealth Bank, Commsec, Urbis, HSBC and St George Bank expect to see a cash rate rise this year.

Ten of the 16 experts suggested the public’s reaction to federal budget cuts will delay the change in cash rate, with nine stating the economy still has to grow in stability before any significant cash rate changes occur.

What the finder.com.au survey of leading economists and money experts had to say…

Economist/expert, organisation

Snap shot of comments

Shane Oliver, AMP

“…Nothing’s really happened. The Reserve Bank has cut interest rates to these record lows, and that has had an impact on the economy…”

Warren Hogan, ANZ

“…There’s no inflation pressure on the economy just yet so they can keep the rates low, and there’s no need to cut them…”

John Symond, Aussie

“…We don’t think there will be a change to rates, as the economy continues to send out mixed signals…”

Steven Pambris, Bank of Sydney

“…The current record low interest rates will have to continue for some time…”

Michael Blythe, CBA

“…What will be interesting to see is how the budget’s reception will impact household consumption…”

Craig James, Commsec

“…There’s been a lot of huffing and puffing about the budget, but really it’s people’s perception. There’s no reason for the reserve Bank to be cutting rates…”

Paul Williams, Heritage Bank

“…The rba will be keeping an eye on the trends in unemployment, developments in key offshore economies, inflation levels and rising tensions in south east asia and europe…”

Paul Bloxham, HSBC

“…The economy is showing signs of rebalancing but inflation is fairly contained at this stage…”

Michael Witts, ING Direct

“…Although consumers appear to reacted adversely to the measures announced in the budget it is too early tell what the lasting impact will be…”

John Caelli, ME Bank

“…Inflation is within the target zone so the RBA can afford to wait and see the recovery unfold…”

Glenn Levine, Moody’s Analytics

“…The RBA will leave interest rates on hold, but this competing dynamic between a below-trend economy and a warming housing market will shape monetary policy in the next 12 months…”

Jonathan Chancellor, Property Observer

“…Other than the post-budget consumer blues, there’s little reason for the RBA board to do anything but issues their monthly minutes this June…”

Nathan McMullen, RAMS

“…Monetary policy settings remain mildly expansionary relative to long run averages and are appropriate given the current outlook…”

Hans Kunnen, St. George Bank

“…The economic recovery isn’t deep enough for them to be raising money this soon…”

Scott Haslem, UBS

“…It’s pretty clear the RBA is expecting the economy to only slowly improve over the next couple of years…”

Nicki Hutley, Urbis

“…Consumers opened their wallets a little wider in the first few months of the year and the housing cycle is in full swing…”

Source: finder.com.au, ordered alphabetically by company name. For detailed comments from the survey please click here (full comments will be live on Friday May 30, 2014)

Now may be a good time for first home buyers go enter the market.

Michelle Hutchison, Money Expert at finder.com.au, said now is the time for prospective first home buyers to hit the market while interest rates are low.

“With our latest Reserve Bank survey showing that interest rates will probably rise within the next year, the window of opportunity for first home buyers to get a head start on the property ladder is closing.

“First home buyers can take advantage of low interest rates if they are ready to buy, with a decent deposit saved. The first year of buying a home loan is usually the toughest financially, so we’re expecting more first home buyers to jump on the property ladder this year.”

finder.com.au analysis of Australian Bureau of Statistics (ABS) data shows that the decline in first home buyers has halted, and the number of first home buyers is at the highest level this year with 6,551 fist home buyer loans financed in March 2014.

After almost one in five home loans financed were first home buyers in September 2012, the numbers dwindled down to about 13 percent of all loans financed in September 2013 – the lowest trough on record. However, the proportion of first home buyers has remained at a steady 13 percent since September 2013.

“With variable home loan interest rates as low as 4.54 percent, the cash rate is clearly supporting those Australians who want to get into the market,” said Mrs Hutchison.

“If you’re paying about $420 per week in rent, you could potentially afford to borrow a $300,000 mortgage, even at the current average variable rate of 5.39 percent.

“If you have a deposit of at least 5 percent and can factor in a buffer for when interest rates rise, it’s worth comparing home loans and consider buying your first home this year.”

[post_ender]



icon-podcast-large

SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

icon-email-large

PREFER TO SUBSCRIBE VIA EMAIL?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Avatar for Property Update

About

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 his opinions are regularly featured in the media. Visit Metropole.com.au


'Economists mixed on the future direction of interest rates' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*

facebook
twitter
google
0
linkedin
0
email

Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!