Interest rates | Where to from here?


Interest rates | Where to from here?

Do you want a better finance structure, perhaps even a 2% home loan? More on that in a minute, but firstly...

The Reserve Bank of Australia (RBA) uses monetary policy (interest rates) as a tool to keep inflation within the target range of between a 2% and 3%; ideally 2.5%

For almost three years inflation has been below their ideal, to the point where possible deflation became a concern last year.

Easing interest rates is how the RBA stimulates more spending in the economy to push inflation higher.

A further reduction in the official interest rate when the RBA met earlier this month, one could argue, was a 'no brainer'...

Or was it?

Weak employment figures, made worse when considering the numbers of people only 'partial employed', coupled with the drop in the participating number of people still looking for work, gave added reason to justify a possible interest rate cut.

Let’s not forget the weaker than expected retail sales figures in the December quarter and retail (generally), resources and manufacturing sectors still struggling.

So why were rates left on hold again?

Rising house prices in Sydney and, to a lesser extent, Melbourne seem to have the greatest influence on interest rate decisions at present.

'Ignored' were housing market conditions in Perth and Darwin, both weak since 2014 with further price falls in the past twelve months, as it seems were those retailers, manufacturers and miners.

The RBA, as I have repeatedly criticised, needs only find the smallest of reasons to:

  1. Deny rate cuts when they appear justified, and
  2. Hike rates, in an almost knee-jerk reaction, if they think that inflation looks like it might (maybe, perhaps) run too high

House prices in just two cities are the strongest reason why the RBA has deferred the inevitable.

Short of Australia experiencing a broad based economic rebound over the next few months, my tip is that the RBA will run out of excuses and be forced to lower the official cash rate further in 2017.

Lending products constantly changing as lenders continue to compete with one another. E.G. Are you aware that MRD has secured a 2% home loan for numerous investors over the past months.

We recommend you ask us to reassess your loan(s) every 12 months or so, and ensure you are still receiving all that the banks are now offering.

If you’re a property investor, or soon to become one, you may qualify for the 2% home loan product.

Yes please! Contact me, I’m keen for MRD to find me better loan products.

Partnering with you for your investment success,

Nick Lockhart