The RBA left the cash rate on hold today at 2 per cent in what was one of the most predicted rate announcements in recent years.
Today’s decision by the board means the cash rate has remained steady for the last seven months, with just two rate increases in 2015 in February and May.
There are mixed views on whether rates will drop further in 2016. Shane Olliver, Chief Economist at AMP Capital believes there will be another interest rate cut.
“Going forward our assessment remains that the economy will continue to rebalance and avoid recession. However, several considerations suggest that the economy will still need a bit more help in order to return to potential growth on a sustained basis,” he said.
“As such we continue to allow for another interest rate cut early next year and still see the $A falling to around $US0.60 next year,” Olliver said.
Impact on mortgage holders
The RBA might have held its ground, but a number of lenders have dropped their fixed home loan rates in the last few weeks, as they bank on a rate cut, or two in the New Year.
According to RateCity.com.au site traffic, the number of people looking for fixed home loans has also spiked by a massive 207 per cent, following the big four banks’ decision to lift their variable rates.
Website traffic peaked again after the rate increases took affect a month later with a 49 per cent rise.
Sally Tindall, money editor at RateCity.com.au, said it was encouraging to see people being more ‘hands-on’ about their mortgage rate.
“Aussies are working out that you can’t wait for the RBA to move rates in order to get a rate cut. You have to get out there and proactively take advantage of the competition,” she said.
“With the cash rate stagnant and variable rates largely on the rise, the focus is now on fixed rates.
“Around 10 lenders are currently offering rates of under 4 per cent, fixed until December 2018. That’s a pretty competitive deal.
“No-one has a crystal ball to know exactly when the cash rate will bottom out, but with rates at record lows, the worst thing for your mortgage right now is complacency.
“Fixing isn’t for everyone – a lot of people prefer to ride the highs and lows of the variable market – but if you are someone who likes to have their mortgage repayments set in stone, it could be a good option,” said Tindall.
- Lowest variable is 3.85% with Reduce Home Loans.
- Around 15 lenders under 4% including UBank, Mortgage House, and Loans.com.au
- One of the lowest 3 year fixed rate is 3.89% with Greater Home Loans
- 5 year fixed rates start from 4.24%, locked in until December 2020