Rate rises now inevitable - it’s just a question of when: John Flavell

Rate rises now inevitable - it’s just a question of when: John Flavell
Rate rises now inevitable - it’s just a question of when: John Flavell


For more than a year, we have seen the Reserve Bank of Australia leave the official cash rate on hold at 1.5%.

And while it made sense for the Board to leave the cash rate untouched until now given the level of economic uncertainty, things are starting to improve across the globe.

Indeed, over the last few months, we have seen significant improvements in both the domestic and global markets.

Domestically, business conditions have shown signs of improvement, the unemployment rate has fallen to a low of 5.4%, and property price growth has started to stagnate across some markets in line with expectations.

With that in mind, it is only fair to assume that next rate movement by the Reserve Bank of Australia could be up.

When exactly rates will rise is very much undetermined. And while we don’t know when exactly the cash rate will rise, we know it won’t take off at breakneck speeds and home loan rates will continue to be lower for longer.

Interestingly, our data shows the majority of Australians also believe interest rates will remain low for the foreseeable future and will only steadily increase over the next 12 months.

When asked what they thought would happen to interest rates throughout 2018, 52.5% of Australians said interest rates would rise, albeit quite slowly. Meanwhile, a further 27.8% said they expect the RBA to leave the cash rate on hold for another 12 months at least.

The reality is, the cash rate will not remain at this level forever. It’s not a question of if, but when, the Board decides the time is right to lift the official cash rate from its current historically low setting.

Of course, as and when rates do rise, it is important for borrowers to remember that mortgage rates are still low by long term standards.

Furthermore, Australia’s lenders remain hungry for business, which is good news for anyone still yet to achieve their home ownership goals.

JOHN FLAVELL is the chief executive officer of Mortgage Choice.

Interest Rates Rba Rate Decision

Community Discussion

Be the first one to comment on this article
What would you like to say about this project?