Christmas has come early for mortgage holders this year, with the RBA’s decision to keep interest rates steady for the last month of 2014, freeing up cash for Christmas spending.
The interest rate, which has been on hold at 2.5% since August last year, is predicted to remain the same until mid 2015.
According to Philip Lowe, Deputy Governor of the RBA, the historic low interest rate has been working in Australia by successfully stimulating the economy as it was intended to do.
While there are no immediate plans to change the interest rate up or down, Dr Lowe believes that having the option to cut rates further in the future if necessary puts the Australian economy in a strong place.
“[In Australia], we are seeing lower interest rates lead to higher asset prices and that’s inducing more real activity in the economy,” he said.
“My judgement would be that if further interest rate reductions were required, they would have some effect in stimulating economic activity.”
Continuing low interest rates
The low interest rate continues to mean easier entry into the housing market for new homebuyers and lower monthly repayments for mortgage holders.
Investment in housing, which has recently been driven by low rates and strong population growth is set to increase by 7.5% in 2015 according to the annual financial and macroeconomic forecasts made by members of the Executive Committee of Australian Business Economists.
If you’re a mortgage holder there’s no immediate need to tighten your belt over the festive season or, if predictions come true, for some months to come.
If you’ve been thinking about downsizing, upsizing or investing, perhaps now is the time to look at your options. As always, we’re here to share our expertise with you, so give us an obligation-free call.
We’d like to wish you and your family the very best of the season. We’ll be back in February so until then, enjoy the low interest rates and the best of the Australian summer.