Housing finance has slowed over the last 12-months and economic growth is well below projected figures. This has prompted the Reserve Bank of Australia (RBA) to cut the official cash rate to 2.25 percent.
According to the Australian Bureau of Statistics (ABS) there were $29 billion in dwelling commitments in November of 2014. While this marked a 7.7 percent increase on 2013 figures, it was below the 25.5 percent growth record during November 2013 to November 2014.
Owner-occupied dwelling commitments rose to $17.3 billion, which represented a 4.4 percent growth during the year. However, there was an 18.7 percent growth for owner-occupied dwellings recorded during the previous year.
Housing investment commitments rose to 12.9 percent reaching $11.7 billion for 12 months to November 2014. During the previous year these commitments rose by 38.0 percent.
Westpac chief economist, Bill Evans is predicting that the RBA will cut rates further in March. This, he says, will then give the Australian economy time to stabilize.
According to Evans, the February rate cut has been made as the timing is right. This coincides with the release of the Statement of Policy and enables the RBA to change their forecasts if needed.
Making rate cuts in the first quarter of 2015 also gives the RBA an opportunity the present a very detailed explanation as to why they’ve made these cuts.
Evans predicts that the official cash rate will reach 2 percent early in the year, and that the RBA will likely sit at this rate until the Australian and world economy start to improve. This is expected to be in mid 2016.
Coleman Sach suggest that the persistent weakness in the economy, low inflation and rising unemployment will encourage the RBA to make a second rate cut early in 2015. This is attributed to the weak September 2014 quarter where the GDP printed at just 0.3 percent, which was less than half of the market forecast.
Are you looking to pay more off your home while interest rates are low? Then talk to eChoice and discuss your options TODAY!
Written by eChoice