Future rate cut a statistical certainty

A survey of 33 economists by comparison website finder.com.au reveals most predict future interest rate falls.

One quarter of the respondent say the cut will come in November, while 39% believe the drop will occur within the first six months of 2017.

Of the remainder, 15% are tipping a fall later in the New Year and nine experts are forecasting a rate rise beyond October 2017.

The cash rate is unlikely to fall below 1.25% according to over two-thirds of those surveyed.

This month’s RBA announcement that rates would remain at historically low levels, however, may not be enough to overcome a flat rental market and stimulate investors, according to the website.

Over half of the surveyed experts believe slow rental market growth could affect property prices, with many saying falling rental yields are making housing less viable for investors.

An increase in housing supply has kept rents down across the country’s capital cities, according to Graham Cooke, Insights Manager at finder.com.au.

“This could see the housing market become less attractive for investors, but the government’s continued policy of negative gearing could potentially ease this effect by reducing investor risk.”

Cooke says the results indicate lenders should consider offering longer terms on fixed-rate loans.

“The ability to lock in a competitive fixed rate for a specified term provides borrowers with the peace of mind in knowing that their repayments will remain unchanged for the duration of the term so they’re protected from interest rate rises,” he says.

Shane Oliver of AMP said, however, Australian borrowers have been reluctant to take on short-term fixed rate mortgages in the past.

“Generally speaking, Australians have been a bit wary of fixed rates even over three or five years, so I suspect there may not be a lot of demand for fixed rate 10 or 20-year mortgages,” he said.

View all articles by Kieran Clair »

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