Cash rate won’t budge in 2016

A RECORD-low cash rate is here to stay in 2016, good news for households who will be able to pay debt off quicker.

MONEYSAVER Home insurance concept. Man holding hands above miniature home

A RECORD-low cash rate is here to stay in 2016 allowing many households to pay debt off quicker.

The Reserve Bank of Australia board on Tuesday meets for the first time this year and while there are strong predictions the cash rate will stay on hold at two per cent, experts are saying this is likely to be the case for the entire year.

St George senior economist Hans Kunnen said while the economy “isn’t going gangbusters” it was ticking along while unemployment remained at a steady rate of 5.8 per cent meaning a much less likely chance of a cut.

“If the world holds together and bumbles along by holding interest rates (in Australia) at two per cent it’s still very low,’’ he said.

“The inflation rate is low enough to not be a concern and by cutting rates the RBA sends a signal that things are really bad.’’

The price of Australian consumer goods and services rose 0.4 per cent in the three months to December and marginally beat expectations.

The RBA board cut the cash rate twice in 2015 — in February and May — but it’s failed to move the cash rate since then.

For borrowers with debts including home loans the record-low cash rate will continue to deliver the opportunity to slash debt as a faster pace.

Analysis by financial comparison website Finder found on a $300,000 30-year home loan the average standard variable rate is 5.11 per cent and the monthly repayments are $1631.

On the same loan the average three-year fixed rate is 4.59 per cent and the monthly repayments are $1536.

The site’s spokeswoman Bessie Hassan said their Reserve Bank Survey which quizzed numerous financial experts found only 24 per cent believed their would be a cash rate cut in 2016.

She urged borrowers to scale ahead on their mortgage debts to maximise the record-low rates.

“Any portion of your principal you can get rid of now is a portion you’ll avoid paying interest on once your repayments increase,’’ Ms Hassan said.

“It’s already hard enough to get ahead, so do yourself a favour now and you’ll be braced for the incoming rate rises.”

But 1300homeloan director John Kolenda believes Australians could see one rate cut in 2016.

The Australian Securities and Investments Commission’s RBA Rate Indicator which monitors market expectations of rate movements forecasted a four per cent chance the cash rate would fall to 1.75 per cent on Tuesday.

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Originally published as Cash rate won’t budge in 2016