RBA to Hold Rates
Borrowers struggling under rising rates can breathe a sigh of relief, with the RBA expected to keep interest rates on hold for the next few months.
AMP Capital Investors chief economist Shane Oliver told The Adviser that while he expects to see more upside in this cycle, the RBA will keep interest rates on hold until the full effect of the last few rate rises is felt.
“We have seen some softening in demand, which should force the RBA to pause rates momentarily. In addition, there is still a lot of turmoil in Europe, so I expect that to have a significant effect on the RBA’s decision,” Mr Oliver said.
“The RBA indicated last month that it had contemplated keeping interest rates on hold, so I think this sentiment will not only be carried over into this month, but also acted upon.
”The RBA has lifted the official cash rate six times in the past seven board meetings.
Mr Oliver said he was 95 per cent certain the RBA would not lift rates again in June – a sentiment echoed by brokers.
According to The Adviser’s latest weekly straw poll, almost 60 per cent of brokers said Australia is approaching the end of the upwards rate cycle.
Of the 556 respondents, 37.4 per cent said the upwards rate cycle was not coming to an end, while 5.8 per cent were unsure.
Broker Brian Taylor said while he wasn’t 100 per cent sure either way, he hoped the upwards rate cycle was coming to an end.
“Business is drying up. People are hesitant to enter the market while ever interest rates are on the rise,” Mr Taylor told The Adviser.
“Nobody knows just how high things are going to go. If interest rates pause, I think we will see more buyers slowly trickle back into the market – particularly first home buyers.”
Article by: Jessica Darnbrough – The Advisor Bulletin 26/5/2010
