Debbie Shankar - 10 Mar, 2014

Where Will the Cash Rate Head This Year?

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Every home loan holder is waiting with baited breath to hear cash rate news. Economists are debating whether rates will remain on hold or go up or down, and while most agree that the only way will be up, some economists feel that another rate cut, possibly two, may be on the horizon.

Bill Evans, Westpac chief economist said at a recent economic indicators launch that he feels that the Reserve Bank of Australia (RBA) is being too optimistic in a flaccid world economy. Evans is suggesting that the unemployment Rate in Australia will continue to rise and this, along with the weak world economy, will reduce business and consumer confidence.

Therefore, it is highly unlikely that the RBA will make an upward move in the cash rate until unemployment levels stabilise. This is expected to happen later in 2014.

Cash Rate Forecast for 2014

Falls in mining investment are forecast to cause a headwind for any strong economic growth, and there is speculation that this, and job losses, may force the RBA to cut rates during 2014 in order to stimulate the economy. Any rate cut is expected to be in a .25 percent increment if it does occur, and this is expected to happen by May if there are no signs of economic improvement.

Despite this, Evans says that property markets will continue to grow, especially if interest rates remain low. Home prices are expected to rise due to demand, particularly in major cities such as Brisbane, Melbourne and Sydney.

Property Market Expected to Play Catch-up in 2014

Evans feels that the property market is moving into a catch-up phase where home prices that were once stagnate or idle will begin to increase in price. This could possibly mean home prices will become less affordable over the coming months and years.

Potential home buyers who are currently looking to buy a home are urged to begin researching the property market now in order to take advantage of low interest rates and lower home prices. This could see them save thousands over the term of their home loan.

Do you want to know more about home loan finance? Then contact eChoice today and find a home loan that suits you and your financial situation.

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