Where will the RBA go from here?

As you have no doubt heard (probably 50 times since yesterday afternoon), the RBA has held the cash rate at 2.50% p.a. for a further month.

What we are more interested in is where rates are heading from here.

As at 5PM yesterday, the ASX futures market was estimating that there may be one more cut to come.

Interestingly, they also predict the cash rate to start lifting from around the middle of next year.

Although a rising cash rate could result in rising variable home loan rates, it is also an indication that the economy is expected to improve. Hopefully this will also indicate a drop in the unemployment rate.

As you can see from our chart below, residential mortgage interest rates have been on a downward cycle for almost 4 years. The big question is how much lower they can go before they start an inevitable upswing.

The chief economist from the CBA, Craig James, indicated yesterday that fixed term interest rate markets already appear to be turning. At this stage we are not seeing any evidence of this change in the retail fixed interest rates but we will let you know if they start to lift.

If you have anything you would like to discuss with us please don’t hesitate to make contact.

We are here to make your finances easier.