real estate

Will the RBA cut rates further this year?

The Reserve Bank of Australia left the official cash rate on hold at last Tuesday’s October meeting, but there is growing speculation that a rate cut is imminent.

Some of that speculation has come from the bank itself, with RBA governor Philip Lowe saying in his post-meeting statement that the Board would continue to consider how additional monetary easing could support jobs as the economy opens up.

That could happen as soon as next month, with the ASX futures market indicating a more than 70 per cent chance of an interest rate cut in November.

In the past the RBA has been reluctant to drop the interest rate to zero, or turn to negative interest rates, leading some to theorize that the Board might instead opt to detour from its regular 25 basis points cut and drop the rate by a smaller amount so it still sits above zero.

But while next month’s interest rate announcement remains to be seen, it looks like there’s little chance of a rate rise anytime soon.

According to Governor Lowe: “It will maintain highly accommodative policy settings as long as is required and will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.”

These targets aren’t likely to be reached for at least 3 years.

Will lenders pass on cuts?

Nothing is ever certain, but typically banks and lenders have passed on at least a portion of any official rate cuts by the RBA.

But even if a small drop in cuts is announced, it could save a property owner thousands of dollars over the life of their loan.

It’s important to remember however that interest rates are already at historic lows right now, so it’s the perfect time to get ahead on your home loan and pay off as much as you can, if you’re in the position to do so.

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