Cheap money set to stay as RBA settles in

Australia’s love affair with cheap money is set to continue today, with no sign interest rates will move in the near future.

RateCity.com.au’s RateForecaster (see below) has predicted rates will remain on hold when the RBA Board meets today, with all 23 economic indicators pointing to the cash rate remaining unchanged.

RateCity money editor Sally Tindall said the RBA would need to see considerable increases in inflation and wages before they could justify a rate hike.

“The future direction for interest rates is up, but nothing can happen until the economy gives the RBA the green light to hike,” she said.

“The International Monetary Fund has predicted mortgage rates will increase to 7.1 per cent by 2022, but the reality is, Australian households are carrying too much debt to withstand a succession of rate hikes.

RateCity data shows that currently the average variable rate is 4.65 per cent across all lending categories.

“The RBA will have enough trouble finding a reason to hike rates even once this year,” she said.

“That said, the end of record low rates will eventually come. Borrowers need to take advantage of this period in our economic history, by getting ahead on their mortgage and creating a buffer for when rates eventually rise.

“Don’t be complacent. There is plenty of competition in the market with rates as low as 3.44 per cent,” she said.

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