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Rates to hold in December, before rising in 2017: RateCity

Official interest rates are poised to hold at the historic low of 1.50 per cent when the Reserve Bank Board meets this Tuesday, according to analysis by RateCity.com.au

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However, their study of over 30 key economic indicators suggests the easing cycle has ended with Peter Arnold, data insights director at RateCity.com.au suggesting the chances of a rate hike in 2017 were mounting.

โ€œAustralians should get ready for rates to go up next year to cool our hot housing market,โ€ he said.

โ€œThe banks have already started moving fixed rates higher; with Westpac the first major bank to move, along with another 22 lenders which have hiked some of their home loan rates.

โ€œWith that many lenders moving fixed rates up, itโ€™s the best sign that we have that a variable hike is on the way.โ€

Warnings came from leading international forecasters, including the OECD, which said the hikes are needed to โ€œunwind tensions from the low-interest environment, notably in the housing marketsโ€.

Arnold said there were two upsets for the housing market last week.

โ€œNew house sales have dropped to their lowest level in two years and NSW Premier, Mike Baird, added his support to negative gearing tax rules,โ€ he said.

โ€œThe good news is that the unemployment rate is set to stay low and economic growth is strong, as are commodity prices.

โ€œThe Federal Reserve is getting closer to lifting interest rates with markets indicating a December hike is imminent, meaning less pressure on the RBA to move with urgency. Nevertheless, we think a rate hike is likely for next yearโ€, he concluded.

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