Interest rates will remain steady at 2.5 per cent for the month of October, great news for current mortgage holders.
However, a tightening of rates in the near future is possible with the RBA weighing into the debate on house price inflation.
The RBA recently introduced ‘macroprudential tools’, including stricter testing of borrowers’ ability to withstand rate rises as a way of reducing the build-up of investor and owner-occupier risk from rapidly rising house prices.
Super low interest rates
“Super-low rates are fuelling strong demand for homes. So the leaning has to be in favour of higher, not lower, interest rates ahead,” said Commsec chief economist James Craig.
Although a rise in the near future is likely, Mr Craig said it won’t happen for months to come “Inflation is contained and looks set to stay in the 2-to-3 per cent target band for some time. As a result, interest rate settings don’t need to budge,” he said.
The Australian dollar was at a four-year low on Monday at US86.75 cents. Citi forecasts the Australian dollar will be around US86 cents by December and at US85 cents in March next year.
The low dollar is good news for domestic retailers, with consumers more likely to shop locally rather than purchasing imported products at a higher product and shipping cost.
This also has a positive effect on our tourism industry. A fall in the Australian dollar will encourage people to spend more on local tourism services, boosting the economy.
If you’ve thought about downsizing, upsizing or investing, with interest rates remaining steady 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.