Where to With Interest Rates In The Near Future

The last Reserve Bank interest rate drop was a major disappointment in that the banks decided not to pass it all on to its customers.
So where does that leave things in the future?
Brad Nolan from Eastern financial Solutions says:
“Unless there is an understanding put in place between the major banks, the Federal Government and the Reserve Bank of Australia, to pass on any possible future interest rate cuts, the Reserve Bank may be inclined to leave interest rates where they are, which could mean ratas will not go any lower.  Personally I am holding out for further cuts later in 2009, but no-one really has a crystal ball.”
Many investors take the view with property investments that they would rather have a fixed rate than a variable rate so that they take any major changes out of the equation which then makes it easier to manage their payments.  If there are rental increases during the time of the fixed loan then this is money that has not been budgeted for and is almost like a bonus, a bonus to be used wisely.
Even though an interest rate cut or two may happen later this year it is generally accepted in the financial field that the RBA is not too keen to go too low.
Michael Pascoe says:
“No-one felt the last cut (to the cash rate).  The banks kept most of it.  To really be felt it needs to be 50 points, which means the RBA has only two shots left as it doesn’t want to go to a zero interest rate policy the way other countries such as the UK, the US and Japan have gone.”

Filed Under: Quantity Surveyor