The cash rate in Australia has remained at an all time low of 2.5% since August 2013, easing the pressure on homeowners and their wallets, but how long will these rates last? Economists are tipping a definite move on interest rates this year – but they are still divided on whether rates will go up or down even further.
Of the 37 economists that were interviewed by finder.com.au recently, 33 of them believed that the cash rate would increase in 2015. When asked more specifically about when in 2015 they expected rates to rise, the economists were divided, with 35% saying the third quarter and 35% saying the fourth quarter of the year.
The reasons given by these economists for the predicted rise in 2015 included:
- The need for stability
- The weakening Australian dollar
- A slow economy
The good news for homeowners however, is that the increase is expected to be quite gradual and shouldn’t come as too much of a surprise to most. If homeowners are only just able to make the minimum repayments now however, they are encouraged to start looking more closely at their finances and where they could cut costs if rates do in fact rise.
The economists who believed that rates might be cut further in 2015 were fewer in number, and were basing their predictions on the price of iron ore falling further and the world economy remaining weak. If commodity prices continue to fall, the Australian dollar remains at current strength and the economy remains subdued on a global scale, some economists believe that the Reserve Bank could potentially cut interest rates even further – to 2 or even 1.5%.
On the whole however, the consensus amongst majority of economists surveyed was that there will be a rate rise in 2015 and it will come in the second half of the year, in the third or fourth quarter, following the further weakening of the Australia dollar and a need for stability on a global scale.