Interest rates to stay low for months

Australia’s home loan interest rates will be on hold for months, and may not rise again till early 2011.

The Reserve Bank of Australia [RBA] has indicated to Mr Mortgage that home loan interest rates were likely to remain on hold for a few more months at least.

In the mean time consumer groups and the Government and Opposition are all putting pressure on Major Banks not to hike home loan interest rates above the official cash rate, as they have said that they would.

Also the non-bank mortgage industry is starting to put “better than bank rate” home loan offers out to their mortgage broker networks.

Any cost of funds for domestic banks would increase slightly, if at all, by the end of 2011 according to the RBA, who have also seemed to be applying downward spin on the banks to stop profit gouging on home loans at the expense of Australian homeowners, and adding to inflationary pressure.

Australia enjoys a Goldilocks economy.

Australian homeowners blessed with a Goldilocks economy: not too hot for interest rates to rise, and not too cold to cause unemployment to be a concern.

Over time the direction for mortgage interest rates seems higher, as low unemployment may drive inflation higher.

In fact the RBA does not see inflation creeping above the magic 2.7% till 2012.

Author: Rick Adlam, Mr Mortgage

About: Rick Adlam: Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers. Website: http://www.mrmortgage.com.au