Mortgage holders are the winners on race day!
- All 33 experts in the finder.com.au Monthly Reserve Bank Survey were correct with no cash rate change on Melbourne Cup Day today
- Cash rate expected to peak at 4% in 2017: finder.com.au Reserve Bank Survey
- Fixed rate home loans still falling: good time for borrowers to lock in!
November 4, 2014, Sydney – Australian homeowners are the winners of today’s Melbourne Cup according to one of Australia's biggest comparison websites finder.com.au, as the Reserve Bank of Australia leaving the cash rate unchanged at a record low of 2.50 percent.
All 33 experts – including from the major four banks – in Australia’s biggest Reserve Bank Survey by finder.com.au bet the cash rate would hold today, with an average of all forecasts suggesting a rate rise in August 2015.
Michelle Hutchison, Money Expert at finder.com.au, said that despite the Reserve Bank often moving the cash rate on Melbourne Cup, variable rate borrowers can enjoy the rate pause in time for the biggest spending season of the year.
“Borrowers with a variable rate home loan are celebrating, as today’s cash rate pause means they won’t be paying higher mortgage repayments for Christmas.
“The odds were stacked against mortgage holders today, with cash rate changes announced on six of the past 10 Melbourne Cup day Reserve Bank meetings.
“Another win for borrowers is that Christmas won’t be marred by higher mortgage costs this year. Even though the finder.com.au Reserve Bank Survey shows that all 33 experts are not expecting any changes to the cash rate in December, if there was a change next month we wouldn’t see rate changes filter through until January.”
The finder.com.au Reserve Bank Survey also found that the cash rate is not expected to stay high for long. Almost half (13) of the 33 experts in the survey are forecasting the cash rate to drop from 2018, following the average peak of 4 percent in 2017.
“Interest rates look set to rise soon, but there are still great value fixed home loans available for borrowers who are concerned about rising mortgage repayments.
“For instance, we have seen 58 fixed home loans from six lenders fall in the past month alone, by as much as 0.61 percentage points. The average three-year fixed rate – which is the most popular fixed term – has dropped slightly from 5.04 percent at the start of October to 5.00 percent now. One-year fixed rates have also fallen from 4.85 percent to 4.81 percent in the same period.
“Three-year fixed rates are starting from 4.49 percent by Newcastle Permanent, while variable rates are starting from 4.54 percent by loans.com.au, which make fixing even more appealing. Make sure you jump online and compare home loans before signing up, because fixed rates may not suit every borrower,” said Mrs Hutchison.
finder.com.au's top variable rate home loans
Home LoanAdvertised rate
|loans.com.au Dream Home Loan||4.54%|
|Newcastle Permanent Premium Plus Package||4.62%|
|Yellow Brick Road Rate Smasher Home Loan||4.63%|
|CUA Fresh Start Home Loan||4.65%|
Source: finder.com.au, based on lowest ongoing advertised rates
finder.com.au's top three-year fixed home loans
Home LoanThree-year fixed rate
|Newcastle Permanent Fixed Rate Home Loan||4.49%|
|ME Standard Fixed Rate Home Loan||4.59%|
|Greater Building Society Ultimate Fixed Rate Home Loan||4.59%|
|IMB Fixed Rate Home Loan||4.69%|
Source: finder.com.au, based on lowest advertised rates
Insights from the latest finder.com.au monthly Reserve Bank Survey:
Expert/Economist, OrganisationWhat will the cash rate peak at and when will this occur?When will it start falling thereafter?
|Garry Shilson-Josling,AAP||4%, 2017||2018|
|Shane Oliver,AMP||4%, 2017||2018|
|Warren Hogan,AMP||4%, 2017||Beyond 2019|
|Melissa Browne,A+TA||4.5%, 2018||Beyond 2019|
|Peter Munckton,Bank of Queensland||4%, 2017||Beyond 2019|
|Steven Pambris,Bank of Sydney||2.75%, 2017||2018|
|David Bassanese,BetaShares||5%, 2017||2018|
|Michael Blythe,CBA||3.5%, 2016||2018|
|Savanth Sebastian,Commsec||4.5%, 2017||2018|
|Noel Whittaker,Queensland University of Technology||3.75, 2017||Beyond 2019|
|Andrew Wilson,Domain Group||3.5%, 2018||2019|
|David De Ferranti,FXCM||5.5%, 2017||Beyond 2019|
|Scott Morgan,Greater Building Society||4.5, 2017||Beyond 2019|
|Paul Williams,Heritage Bank||5%, 2017||2017|
|Paul Bloxham,HSBC||4%, 2017||Beyond 2019|
|Michael Witts,ING Direct||3.25%, 2016||2018|
|Paul Clitheroe,IPAC securities||3.5%, 2016||Beyond 2019|
|Grant Harrod,LJ Hooker||N/A||N/A|
|John CaelliME||4%, 2016||2018|
|Glenn Levine,Moody's Analytics||4.5%, 2016||2018|
|Lisa Montgomery,Mortgage and Consumer Finance Expert||4%, 2016||2017|
|Huw Bough,My State Bank||4.5%, 2017||2018|
|Alan Oster,NAB||4.5%, 2017||Beyond 2019|
|Jonathan Chancellor,Property Observer||3.5%, 2016||2017|
|Angus Raine,Raine and Horne||4%, 2017||Beyond 2019|
|Nathan McMullen,RAMS||3.5%, 2016||2019|
|Angelo Malizis,Resi||4%, 2017||2018|
|David Scutt,Scutt Partners||3.75%, 2017||2018|
|Janu Chan,St. George Bank||4.25%, 2018||2019|
|Gavin SmithState Custodians||N/A||N/A|
|Scott Haslem,UBS||5%, 2018||2019|
|Nicki Hutley,Urbis||5%, 2017||2018|
Source: finder.com.au, ordered alphabetically by organisation
What our experts had to say in the finder.com.au Monthly Reserve Bank Survey:
- Garry Shilson-Josling, AAP:“The housing market's too strong to allow a cut but the rest of the economy is too soft to cope with an increase. If macroprudential policies to cool the investor segment of the housing market work – and there's no good reason to suppose they won't – the RBA should be under no real pressure to jack rates up in a hurry.”
- Shane Oliver, AMP: “Nothing much has changed since the last meeting. Growth is ok, but still sub-par, global uncertainties remain, the $A is still too high, inflation is still benign and the RBA is yet to drop its reference to a "period of stability" in rates being prudent.”
- Warren Hogan, ANZ: “Inflation is low, while growth is soft.”
- Melissa Browne, A+TA: “While the housing market has taken off, there are areas of the economy that still need stimulating. I believe the housing bubble, especially in Sydney, is not enough for the RBA to increase rates but the danger is that, with historically low interest rates and historically high prices, it won't take much of an increase in interest rates for the effect to be felt by housing owners and the economy to slow.
- Peter Munckton, Bank of Queensland: “The RBA has the level of the cash rate where it wants it. “
Steven Pambris, Bank of Sydney: “Economic factors remain weak however with current pressures on residential prices especially in Sydney, reduction will not be considered due to fear of fueling the residential bubble further. Rates will remain steady for some time.”
- Steven Pambris, Bank of Sydney: “Economic factors remain weak however with current pressures on residential prices especially in Sydney, reduction will not be considered due to fear of fueling the residential bubble further. Rates will remain steady for some time.”
- David Bassanese, BetaShares: “Continued low inflation and only modest economic growth.”
- Michael Blythe, Commonwealth Bank: “Low inflation allows the RBA's period of rates stability to continue.”
- Savanth Sebastian, Commsec: “The Reserve Bank continues to preach stability in interest rates. There is nothing in the latest minutes to suggest that Board members have become more optimistic, nor more pessimistic. The Board believes that the cash rate is at the right level to support the economy and keep inflationary pressures in check.”
- Noel Whittaker, Queensland University of Technology: “The cash rate will not go up. Glenn Stevens has said any further cuts won't work - Kerry Stokes says toughest conditions in 25 years.”
- Andrew Wilson, Domain Group: “Mixed signals remain although bias now turning to the downside. Reserve Bank waiting for crystallization of general economic climate - but house prices now falling, inflation low, unemployment and dollar still too high,sharemarket weaker and rising concerns over global economic outlook.”
- David De Ferranti, FXCM: “The soft local labour market and subdued inflation expectations suggest the RBA will remain accommodative over the near-term. Further the need to rebalance the local economy is likely to offset a desire to quell speculative lending and cool the housing market.”
- Scott Morgan, Greater Building Society: “The RBA has indicated a period of stability in rates and I do not see that changing in the immediate term. Weaker inflation has made a cut in rates even less likely than in previous months. The RBA is cognisant to a potential build-up in asset prices and the flow on risks that causes. Therefore, there is scope for rate increases inside the next nine months supported by these risks, a possible upward move in US rates (which will continue to cause a reduction in the Australian dollar) and improving economic indicators in the Australian Economy around GDP, unemployment and retail sales.”
- Paul Williams, Heritage Bank: “The RBA appears happy to remain on hold while the domestic economy tries to build some momentum. The RBA will be keeping an eye on the trends in unemployment, inflation levels, developments in key offshore economies and geo-political tensions in middle east and europe.”
- Paul Bloxham, HSBC: “Growth is still below trend, the labour market is still loose and inflation is still well contained – so they don't have any reason to think about hiking but at the same time I can't see them cutting rates while the housing market is still booming.”
- Michael Witts, ING Direct: “Again this month, the fundamentals in the economy have not changed significantly, the economy remains in transition with the housing sector in Sydney in particular very strong. A monetary policy response is not the appropriate policy instrument to deal with a stronger level of activity in one sector of the economy.”
- Paul Clitheroe, IPAC Securities: “Economy in surprisingly nice balance. Dollar down, housing boom slowing a little, inflation fine, unemployment acceptable. Sit and watch… I suspect the unexpected may surprise on the upside.”
- Grant Harrod, LJ Hooker: “There have been no surprises over the past month for the RBA to shift away from its neutral policy position. Positively for the RBA, the rate of growth of both house prices and housing finance commitments slowed over the past month. These two indicators have been the chief concern for the RBA over recent months and this deceleration will provide some breathing space for the board. Our view is that the even balance of the economy is set to see interest rates remain on hold until at least mid-2015. Record low interest rates and demand continuing to exceed supply in many markets, has helped house price growth across the country and, as noted by the latest LJ Hooker buyer/seller index, pushed the property market strongly in favour of sellers. This strength and price growth has been the main focus of commentary and concern from the RBA over recent months. However, while buyer demand still remains strongly in place, the current spring selling season has seen listings begin to rise to accommodate this demand. This has in turn seen price growth begin to moderate and with it any likelihood of a change of interest rates in the near term.”
- John Caelli, ME: “With inflation still well behaved and the dollar still higher than the RBA would like, the Bank can afford to wait until there is more clarity on global movements and developments in China.”
- Glenn Levine, Moody’s Analytics: “Inflation is at the middle of the RBA's target band. The housing market remains buoyant, but the rest of the economy is still soft and the A$ remains slightly elevated, precluding an interest rate increase. The ABS's problems with its employment data make it more difficult to get a timely read on the economy, complicating the RBA's job and cementing the case for leaving rates on hold for several more months.”
- Lisa Montgomery, Mortgage & Consumer Finance Expert: “The RBA will continue to maintain its hold status with regard to the official cash rate. The housing market and Australian Dollar remain high on the watch list and even though the Dollar has fallen in recent times, it’s still high by historical standards. Inflation continues to remain within target, which means that unlike other Melbourne Cup day announcements borrowers are unlikely to see a change at the November meeting.”
- Huw Bough, My State Bank: “Resources sector spending starting to decline, most of the data across the economy points to moderate growth”
- Alan Oster, NAB: “RBA waiting to see how non mining responds to cuts already made.”
- Jonathan Chancellor, Property Observer: “The Australian and international economy is simply not strong enough to warrant any rate hike. And while the continued RBA jawboning on property is beginning to take effect, the east coast property market remains too strong to warrant that occasionally mooted one last cut. The other factors unemployment and wages are still dampening inflation. I think the pointer for any rise in official rates might not be until the US Federal Reserve does so.”
- Angus Raine, Raine & Horne: “The RBA’s jawboning of rapid real estate price growth seems to be kicking in, except in Sydney, while the latest drop in inflation will help keep rates on hold for some time yet. That said, longer-term inflation expectations, reported late last week, will also give the central bank some food for thought.”
- Nathan McMullen, RAMS: “Monetary policy settings remain mildly expansionary relative to long run averages and are appropriate given the current outlook for inflation, unemployment, housing credit growth, property prices and exchange rates settings.”
- Angelo Malizis, RESI: “Soft economic environment”
- David Scutt, Scutt Partners: “Very little has changed on the domestic economic front since the Board last met on October 7. I believe the statement will largely be a cut-and-paste job from what was seen then, including the all important final paragraph.”
- Janu Chan, St. George Bank: “The ongoing message of "stability in interest rates". While the RBA remains concerned about the elevated level of the Australian dollar.”
- Gavin Smith, State Custodians: “With the latest inflation figures well within the acceptable range, the RBA will most likely leave cash rates on hold again this month.”
- Scott Haslem, UBS: “While domestic activity is improving modestly - enough to argue against further rate cuts - it is not sufficiently strong to justify lifting rates.”
- Nicki Hutley, Urbis: “Commentary from the RBA has been clear that the current steady as she goes policy will continue for some time. Employment and inflation indicators support this stance at present.”
- Bill Evans, Westpac: “Since mid-March Westpac has expected that the next move in policy will not be until August next year. Market pricing is pointing to steady rates (around 50% probability of a cut next year) through both 2015 and 2016. We remain comfortable with our view that the policy tightening will begin around August next year while recognising that to date the pick-up in momentum in the Australian economy has really only been apparent in the housing market.”
Please note: The above respondents are ordered alphabetically by name of organisation
Disclaimer: the comments, forecasts, projections and other predictive statements by the panel of experts are assumptions based on currently available information. These forecasts are based on industry trends and economic factors that involve risks, variables and uncertainties. No guarantee is presented or implied as to the accuracy of these forecasts and consumers are advised to read product disclosure statements and understand if financial products are right for them before signing up.
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The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
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