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Fed hike could see RBA follow suit in 2017


RBA 2016 in reviewThe Reserve Bank is predicted to hike rates this year following an upward move by the US Federal Reserve.

The Federal Reserve this week increased the Federal Funds rate by 25 basis points to 0.75%, with indications it could rise a further 75 basis points over the course of 2017. Mortgage Choice chief executive John Flavell has predicted that the announcement, combined with the fact that Australian lenders have already begun moving on rates, mean a rate hike by the RBA is “now more of a possibility than not in 2017”.

“The Reserve Bank of Australia had previously stated that the easing bias has passed and the latest changes by the US Central Bank would support this,” Flavell said.

But Flavell argued that even with rate increases, home loan interest rates remained “very low by historical standards”.

“Any rate rises are likely to be small, which will help keep the cost of borrowing incredibly affordable. As a result, I would expect certain parts of the property market to remain strong,” he said.

Flavell argued that demand for property was likely to remain strong throughout 2017, with low rates and low unemployment underpinning a healthy property market.

“With all of this in mind, I wouldn’t be surprised to see continued growth in property prices across some markets, specifically Sydney and Melbourne. While the level of growth may not be as strong as we have seen in recent years, overall, we can expect to see growth continuing.”

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