Could Our Interest Rates Go Lower?

The last recorded benchmark interest rate in Australia was 2.50 percent, and the average interest rate in 1990 - 2014 was 5.24 percent. Australian interest rates reached an all time high in January 1990 and the lowest recorded rate was 2.50 percent in August 2013. Since then, the country has been sitting at the 2.5% rate for more than a year now.

The Reserve Bank of Australia’s Board makes all the decisions regarding interest rates and is also responsible for the reporting. With the low interest rates the country has been enjoying a good level of property returns and the rate is predicted by some to fall even lower – Credit Suisse  came out this week with a prediction for rates to fall to 1.5% by the end of next year.

The reason behind this could easily be the low business and consumer confidence, rising unemployment issues and falling inflation.  So it might not be the best time to lock in a fixed rate on your mortgage just yet.

It Might Be Time for a Rate Cut

Whenever a country needs to encourage spending and investment, a rate cut is the best way to start. For some in Australia 2.50% might seem like a low rate, but it is comparatively much higher than any other Western Country – Europe, America, you name it.

If the RBA does cut down the rate, they will directly end up boosting the Sydney and Melbourne property market which have seen high levels of growth in 2014 and are already over stimulated, so it really is a balancing act.

Due to the deceleration in mining, construction work has taken up the biggest slack, which is why keeping growth in the housing market is essential. I believe that the price growth and construction levels in Perth, will continue to slow over the coming year so it will really depend how our economy fairs as a whole as to whether we will see the rate cut happen... my money is on a rate cut in the second and fourth quarter of 2015.