The cash rate: what the experts are saying

At the RBA’s September meeting, the cash rate held steady. And whilst the decision was widely expected, speculation has been rife around if and when a further rate cut could come.

Experts agreed the RBA was taking a “wait and see” approach to the cash rate after the February and May cuts. Many have predicted a further reduction before the end of the year, with some going as far to say that a cut on Melbourne Cup day should be expected.

Domain reported this month that AMP chief economist, Dr Shane Oliver and Domain senior economist, Dr Andrew Wilson both forecast a cut of 25 basis points to 1.75 per cent in November.

Dr Oliver stated that he believed the RBA will cut interest rates again because the economy is continuing to run at a sub-par pace.

Dr Wilson suggested the timing would work with markets winding down in December and no rate decision in January. He went on to say a cut in November could give enough time for the reduction to be effective this year, while the spring market is in full swing.

In the short term, most agree rates will remain low and are likely to go lower, but the reality is an eventual rate rise is unavoidable - it’s simply a matter of time.
When that time will come will largely depend on how the economy performs. A rate rise will most likely be gradual, however, homeowners and buyers need be prepared for it.

As with all cash rate decisions, the banks respond with adjustments to interest rates and when interest rates rise, so too do home loan repayments. Mortgage holders are wise to make sure they’re financially ready for the inevitable rate rise - no matter how far into the future it may seem.