Experts predict RBA will keep rates on hold for July: Finder

Experts predict RBA will keep rates on hold for July: Finder
Jessie RichardsonDecember 7, 2020

All experts surveyed by a rates comparison website have predicted that interest rates will stay on hold tomorrow.

In a survey conducted by Finder.com.au, 18 expert respondents believed the Reserve Bank of Australia (RBA) will keep the overnight cash rate at its record low of 2.50 for July.

Of the respondents, 11 predicted that rates will rise in the next 12 months. Six experts – from Commonwealth Bank, Commsec, AMP, HSBC, St George Bank and Urbis – stated that interest rates could begin picking up before the end of the year.

The cash rate will stay on hold for this year, rising in the second half of next year, according to experts from Heritage Bank, RAMS, AAP and Westpac.

With almost all predicting an eventual rise, treasurer of ING Direct Michael Wills was the only respondent who argued that the cash rate could either increase or decrease at its next move, believing there were convincing cases for each scenario.

Analysis and research firm BIS Shrapnel, who did not participate in the survey, expect rates to stay on hold until an increase in 2015, anticipating a subsequent decrease in demand for off the plan properties.

“The expected tightening in interest rate policy is forecast to have an impact on off-the-plan purchasers,” wrote BIS Shrapnel in a statement last month.

“The first rises in interest rates are anticipated around the middle of 2015, with interest rates expected to reach their peak towards the end of 2016, thereby dampening demand over the subsequent years, and causing both new apartment approvals to decline and prices to weaken.”

According to Michelle Hutchison, Money Expert at Finder, borrowers must begin planning for a future rate rise.

“It looks like we have well and truly hit the bottom of the cash rate cycle and interest rates are set to climb within the next 12 months, with only one of the 18 experts in our survey (ING Direct) was unsure of which direction the next rate move will be,” said Hutchison.

“According to the Australian Bureau of Statistics, over 70% of households have some form of debt such as a home loan, credit card, personal or business loans or unpaid bills. So regardless of whether the next cash rate rise will be this year or next, it’s likely that most households across Australia will be hit hard and need to start planning ahead before it’s too late.”

Using ABS Housing Finance data, the comparison website has found Australians are increasing their debt levels in the housing market. The average home loan size has increased by 64% since 2004 to $314,000. The average size of fixed home loans has increased by 97% over the last decade, to $327,000.

For first home buyers, the average loan size has risen by 50% to $301,000.

“With average home loan sizes among the highest we’ve ever seen, it’s a real concern that many borrowers will struggle with bigger interest rates," said Hutchison.

“If the cash rate reaches average levels of the past decade of about 5 percent and home loan interest rates follow to an average of about 7 percent, that would cost the average home loan of $318,000 an extra $345 per month or over $4,000 in a year."

“Everything you can do now to pay down your debts as much as possible will reduce the impact of rising interest rates in the near future,” she said.

For the experts' predictions and commentary, go to the next page.


The experts surveyed by Finder made the following predictions:

Garry Shilson-Josling, AAP

"...The recovery will be slow so there's no need to put the brakes on with a rate rise just yet. The outlook is highly uncertain, but in the absence of a major global shock the RBA should start lifting rates again after a fairly long wait as the economy slowly gathers pace..." 

Predicts rates will change: Late 2015

Shane Oliver, AMP    

"...The Reserve Bank has cut interest rates to record lows...to boost the rest of the economy, and there's spectative evidence that it's working, but it's still tentative... The most recent budget has had a negative impact on confidence, and that's thrown a bit of a spanner in the works..."

Predicts rates will change:  Late this year or early next year

Warren Hogan, ANZ

"The economy is playing out as expected ... essentially monetary policy is set to remain on hold for an extended period of time."

Predicts rates will change: Next year, possibly first half of 2015.

Steven Pambris, Bank of Sydney

"...The measures announced in the budget were as per our expectations with contractionary impact already reflected in the drop of consumer confidence in the latest surveys. We see that the current record low interest rates will have to continue for some time and in line with our previous position do not expect any movement in rates in 2014, if any more likely in March 2015"

Predicts rates will change: March 2015

Michael Blythe, CBA 

"The economy appears to be improving, but there's still a lot of uncertainty of course so it's the RBA's preference to wait and see what happens..." 

Predicts rates will change: November 2014

Craig James, Commsec

"...At the end of the day, the Reserve Bank wants to keep inflation between 2.03%... As each month passes it does appear clear the Reserve Bank wants interest rates to remain where they are for a long period of time..."

Predicts rates will change: November/December 2014, maybe early 2015

Don Magin, Greater Building Society

"...There is no sign of inflation. The RBA will be particularly concerned about pressure on capital expenditure. The good GDP growth we saw in 2012, based on investment by the mining sector, has subsided..."

Predicts rates will change: Mid-2015

Paul Williams, Heritage Bank

"The RBA appears happy with current rate settings while the domestic economy tries to build some momentum. The RBA will be keeping an eye on the trends in unemployment, the strength of the Australian dollar, inflation levels, developments in key offshore economies, as well as rising tensions in the Middle East..." 

Predicts rates will change: Well into 2015

Paul Bloxham, HSBC

"...Economic growth is still underway and interest rates will remain at record lows – which is where they are now."

Predicts rates will change: Around the end of the year, around Q4

Michael Wills, ING Direct

"...It is difficult to see a scenario in which the RBA would change the cash rate... Equally compelling scenarios can be constructed to support both an increase and a decrease in the cash rate... Rates are on hold for an extended period that could extend into the first quarter of 2015."

Predicts rates will change: Could extend into the first quarter of 2015

John Caelli, ME Bank

"...Growth remains moderate and consumer confidence has taken a hit following the Federal Budget. The uncertainty over the Budget process will cloud the outlook for a period of time. The next likely rate change will be in the first half of 2015 and is likely to be up."

Predicts rates will change: First half of 2015

Glenn Levine, Moody’s Analytics

"...Inflation is within target and the economy is expanding slightly below potential... Tepid wage growth and a slightly looser labour market will help to keep inflation within target... The next move will likely be an interest rate increase around the middle of 2015 as we expect certain parts of the economy to be bumping up against capacity constraints by this time."

Predicts rates will change: Mid-2015

Jonathan Chancellor, Property Observer

"...I still think the next rate change won't be until 2015, although the RBA historically likes to surprise. Let's see how the federal budget aftermath works it way through the economy after the new Senate in July takes effect. Consumer sentiment is still at its lowest level in almost three years..."

Predicts rates will change: 2015

Nathan McMullen, RAMS   

"...Monetary policy settings remain mildly expansionary relative to long run averages and are appropriate given the current outlook for inflation... We continue to expect the RBA to keep interest rates on hold through the remainder of 2014 and much of 2015."

Predicts rates will change: Q4 2015

Janu Chan, St. George Bank

"...On the one hand interest rates are quite low, and they are helping to support the economy, but at the same time there are some risks on the horizon... The strong growth that we saw in Q1... We'll not be sustaining that momentum in Q2..." 

Predicts rates will change: November of this year, but this could be delayed until early 2015.

Scott Haslem, UBS

"...We're seeing signs of improvement within the non-mining economy. The overall outlook for the economy is contained... The economy is not showing enough improvement for concerns of inflation..."

Predicts rates will change: Not until 2015

Nicki Hutley, Urbis

"...A solid first quarter economic performance is likely to be followed by a bit of a stumble in the second quarter of 2014, on the back of weaker consumer confidence and demand following the Federal Budget... The RBA will want maintain its watch and wait stance for at least another quarter..."

Predicts rates will change: Q4 2014

Bill Evans, Westpac 

"...The terms of trade will have fallen in Q1 while the AUD has remained stubbornly high. We retain our forecast for an improvement in the condition of non mining equipment investment from a contraction of 11.5% in 2013 to a modest lift in 2014 of 3.4%..."    

Predicts rates will change: Third quarter of 2015, with a 25 basis point hike in both the September and December quarters

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