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What will interest rates do in 2017?

As this year draws to a close, the million dollar question is where are interest rates headed in 2017?low interest rates

Before we look ahead to next year, however, we need to take a look back over the past two years to understand where rates have been.

In 2015 and 2016, there were a lot of changes in the loan market, including changes to the owner-occupier and investor mix, high and low loan-to-value ratios, as well as interest -only and principal and interest loans, which have all impacted on the interest rate environment of today.

In 2017, many respected economists believe we’re still going to see a 50 basis point reduction to interest rates, which may be two 0.25 basis point decreases next year.

The thing is I don’t necessarily agree with that forecast.

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Rates are at an all-time low and rate decreases aren’t really having an impact on the market apart from fuelling our two biggest property markets of Sydney and Melbourne.

Another reason why I don’t believe that further rate cuts are a good idea – although lower interest rates are always nice –  is that the next policy move really needs to be about stimulation of our economy.

We need more government assistance for big and small businesses to help get more people into jobs.

With more people employed, earning sound incomes, then they’re happy and confident to spend, which will in turn improve our economy.

child motivation inspirationContinuing to cut interest rates, which are now at 1.5 per cent, would also leave us with very little leverage to reduce them further if we needed to at some stage in the future.

I’d prefer to see interest rates stay where they are in 2017 – I know that won’t be terribly popular with a lot people – but I believe that if you can’t manage your home loan today, with historically low rates, then more reductions probably won’t help you that much.

So, as we say goodbye to 2016, it’s important that you review all your loans to ensure they’re working as well as they can for your individual financial situation.

 

 



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About

Andrew is a leading finance strategist who holds a Diploma of Financial Planning (Financial Services). With over 27 years of experience in finance, Andrew has been acknowledged by the mortgage industry with multiple awards.Visit www.intuitivefinance.com.au


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