What will happen with interest rates?

Economists have been up to their favourite pastime, crystal ball gazing

As reported by realestate.com 31 January 2024 we have seen the strongest indication that the reserve bank interest rate hike cycle is over.

With the latest figures in, inflation has eased to 4.1% which is the lowest in 2 years.

Driving inflation has been insurance which has increased 16.2% in the last 12 months which is the largest annual rise since March 2001.

PropTrack senior economist Paul Ryan said that rent inflation remains extremely high, having risen 7.3% over the last 12 months.

Data from PropTrack revealed that national rent prices have increased by a third over the past 2 years.

However, Mr Ryan suggested that financial pressures look to be easing in 2024, with slowing price growth, expectations of lower interest rates, and a slower pace on rental increases.

The string of soft data all by confirms that the RBA will keep interest rates on hold at the start of February when it meets for the first time this year.

Financial markets are pricing in almost no chance of an interest rate hike in February.  They are also predicting that there will be a interest rate cut in September 2024.

The major Banks are predicting the following interest rates by October 2025:

• ANZ 3.6%
• NAB 3.1%
• Westpac 3.1%
• CBA 2.85%

What that means for home owners is that a borrower with a $500,000 mortgage has seen their mortgage increase by about 60% which is about $1300 per month.

If interest rates fell to 3.1% taking the middle ground on the predictions, that would mean that the same home owner would save around $411 per month.

You always have to tread with caution when looking at predictions, however, it seems that all signs are pointing to some relief in the future.

We can only hope!