RBA may not lower the cash rate any further :

A growing number of economic indicators have suggested that the Reserve Bank of Australia’s (RBA) historically low cash rate of 1.5 percent would not go down any lower.

Peter Arnold, data insights director at said banks were beginning to hike their home loan rates with close to two-thirds of lenders increasing rates on fixed loans and a smaller number lifting variable rates.

“Previously, banks were betting on lower rates in the future but we saw those expectations change daily during the past quarter,” Arnold said.

“The ‘Under 4 Club’ for fixed rates contracted by 15 per cent over the quarter; that’s around 100 less sub-4 per cent fixed rates on offer now compared to three months ago.

“Consumers quickly responded and appetite shifted towards fixed rates.

“We saw interest through RateCity for fixing rise by close to 30 percent towards the end of the year,” Arnold said in a report released on Thursday.

Meanwhile, warnings have come from leading international forecasters, which said the hikes were needed to “unwind tensions from the low-interest environment, notably in the housing markets.”

“There were two upsets in the domestic housing market; new house sales dropped to their lowest level in two years, and support grew to review negative gearing tax rules,” he said.

Looking abroad, the Federal Reserve lifted US rates in December, and while the move eased pressure on the RBA to lift the cash rate when it meets in February, the outlook for higher rates in 2017 remains.

“Looking ahead to 2017, consumers should expect more rate rises and an even tougher time finding a good rate on their savings.

“While there are still plenty of home loan rates under 4 percent, those deals are less prevalent now.

“It’s unlikely that we’ll see rates return to the long-term average of around 7 percent just yet, but competition at the low-rate end of the market is slowing,” he said.

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June Ramli

June Ramli was a in-house journalist for Elite Agent Magazine.