In news that is encouraging to Australian mortgage holders, according to property and economic experts, Australia's current record low interest rates will remain in place for a while, with 2023 looking like the earliest we will see rates moving upwards.
The Reserve Bank of Australia (RBA) slashed rates twice in March, with an emergency meeting mid-month lowering rates to a record low of 0.25%
After going nearly 3 years without moving rates, the RBA have cut rates a total of five times in the last 12 months alone.
For those keeping an eye on the official interest rate, “the next few years are likely to be pretty boring”, says AMP economist Shane Oliver.
Property data and analytics provider Corelogic predict that interest rates will remain on hold until 2023.
RBA Governor Philip Lowe has said that interest rates will not rise until the economy is “growing robustly”. And in its May meeting minutes, the RBA “reaffirmed the elements of the policy package announced on 19 March 2020, namely, a target for the cash rate of 0.25 per cent.”
Bill Evans, Westpac’s Chief Economist, does not believe interest rates will rise for some time. “We expect that the overnight cash rate is unlikely to be lifted before December 2023,” says Mr Evans.
Negative interest rates?
You may have seen other parts of the world taking the unconventional step of reducing interest rates below zero. Even the Reserve Bank of New Zealand (RBNZ) have started to consider it. “Speaking to parliamentarians earlier this month, RBNZ Governor Adrian Orr did not rule out negative interest rates.”
However, don’t expect to see the same happen here, with the RBA declaring that the current interest rate is the lower bound. RBA governor Philip Lowe recently reiterated that “it was extraordinarily unlikely that we would have negative interest rates. The Board is not contemplating negative interest rates in Australia. I think the costs of that exceed the benefits.”
How does this affect your home loan?
With the interest rate being at a record low, there’s extremely tough competition amongst lenders. However, the customers who benefit the most are those that take the initiative, with the recent ACCC Home Loan Price Inquiry interim report finding that borrowers who don’t refinance to another lender pay a ‘loyalty tax’ and that those who move to another lender or ask for an improved deal with their existing lender achieve significant interest savings. This is especially true in the low interest rate environment that we’re currently experiencing.
Now’s a great time to consider your refinancing options.
And CoreLogic says the trends show that more and more homeowners are doing just that.
“We continue to see refinancing at elevated levels..” it says.
So, if you too would like to explore your refinancing options, then please get in touch.