RBA predicts more cuts coming that will result in cheaper mortgage rates
Home loan customers could see their interest rates fall after the Reserve Bank of Australia signalled more changes to the cash rate could be on the way.
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Borrowers could see their home loan interest rates fall further as the nation tries to weave its way out of the COVID-19 economic disaster.
The Reserve Bank of Australia’s deputy governor Guy Debelle said yesterday the central bank could adopt monetary easing policies which would result in the cash rate falling from a historical low of 0.25 per cent to 0.1 per cent.
The cash rate is the interest rate on unsecured overnight loans between banks.
Experts said this would in turn see a reduction to mortgage rates which are already sitting at record lows – with some deals having a “1” in front.
Mr Debelle said during the pandemic, the economic recovery “has not been a rapid bounce but more of a slow grind” and was being hindered by the long-running Victorian lockdown.
“The virus is having its effect, particularly because of the lockdown in Victoria, but so too is the shortfall in demand that occurs in recessionary conditions,” Mr Debelle said.
“Until households and businesses are confident about future demand and income they will be reluctant to spend and invest.”
HSBC chief economist Paul Bloxham said if the cash rate does fall further “it could see mortgage rates come down a little bit further”.
“Mortgage rates are already very low but it’s mostly that the RBA has made it clear that they don't intend to make the cash rate negative,” Mr Bloxham said.
“Given we are already at 0.25 basis points there’s not a lot of wriggle room.”
The mortgage market has remained extremely competitive during the pandemic and most owner occupier principal and interest deals are now within the two per cent range.
CommSec’s chief economist Craig James said the RBA hadn’t ruled out adopting measures to stimulate the economy.
“However there remains no urgency to act,” he said.
“Interest rates are set to remain near current levels for three years.”
Earlier this month all of the big four bank bosses told a parliamentary committee into the COVID-19 response they expected Australian property prices to fall by 10 per cent in the next 12 months.
Mr Debelle’s said while the unemployment rate in August of 6.8 per cent “was better than expected” it was a rough ride ahead for the jobs market.
“The recovery in the labour market is likely to be bumpy and uneven and we still expect the unemployment rate to rise from here,” he said.
Payments for 3.6 million JobKeeper and 1.82 million JobSeeker recipients will be wound back from Monday, cutting payments by $300 per fortnight per person.
Treasurer Josh Frydenberg will hand down the nation’s Federal Budget on October 6 when its expected the deficit will balloon to more than $200 billion.