Experts australia set for unprecedented interest rate cuts in

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THE cash rate is tipped to not only drop today but begin its march towards an anticipated and unprecedented level of 1.5 per cent.

For home loan customers mortgage interest rates with a 3 in front appears imminent.

The Reserve Bank of Australia board meets today for the second time this year and its widely experted they will decrease the cash rate from 2.25 per cent to two per cent the lowest in Australias history.

HISTORIC LOW: RBA cut interest rates to 2.25 per cent in February

The high unemployment rate, softening of the Chinese economy, the mining sectors lead on a bigger fall than expected in business investment and a high Australian dollar are fuelling the expected drop.

But AMP chief economist Shane Oliver expects there to be further decreases on the horizon and result in home loan interest rates plummeting to below 4 per cent as borrowers continue to surge ahead in their repayments.

It wouldnt surprise me if we saw the cash rate at 1.5 or 1.75 per cent,’ he said.

Those people who already have a mortgage are choosing to pay it off as quickly as they can.

Australian home loan customers are on average more than 24 months ahead on their mortgage repayments.

Financial research and comparison site figures show on a $300,000 30-year home loan the lowest average standard variable rate is 4.19 per cent making monthly repayments $1465.

If a home loan rate falls to 4 per cent monthly repayments would drop to $1432.

Aussie Home Loans executive chairman John Symond also expects a rate drop today and says homeowners will be likely to enjoy more falls in the coming months.

I think theres probably another two rate cuts left,’ he said.

I would hope and pray it doesnt go any further than that because that would signal that our economy is really heading the wrong way.

We want interest rates to start dribbling up because thats a signal that the economy is getting back on its feet and we are heading in the right direction.

He believes in the next to four to five months the cash rate could fall to 1.75 per cent, but doesnt think this will dramatically impact property prices.

New data released by CoreLogic RP Data yesterday showed the average capital city home prices increased by 0.3 per cent in February, taking the annual rise to 8.3 per cent.

The best-performing capital city was Melbourne where dwelling prices rose by 4.5 per cent in the three months since December, followed by Hobart (3.3 per cent), Sydney (2.8 per cent), Canberra (1.6 per cent), Adelaide (0.8 per cent) and Brisbane (0.5 per cent).

In Darwin dwelling prices fell by -1.0 per cent and in Perth -0.9 per cent.

Unemployment levels jumped to their highest levels in January since 2002 from 6.1 per cent to 6.4 per cent.

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