Interest rates could drop further with cut tipped for February

HOME loan customers could be in for a pleasant surprise next month with finance experts already predicting the Reserve Bank could cut the cash rate in their first meeting of the year.

The cash rate is already on its lowest in recorded history at 1.5 per cent and could be set for another cut as soon as February or March according to experts.

Finder.com.au’s latest RBA survey has 52 per cent of experts predicting a rate cut this year, with four experts expecting the rate cut as soon as February.

However, Money Expert Bessie Hassan warned historically low rates might not be enough to stop banks from hikes.

“Out-of-cycle rate hikes could be a theme in 2017, with several lenders including Westpac, Bank of Sydney and P & N recently announcing rate hikes, marking the second out-of-cycle home loan rate hike since November 2015,” Ms Hassan said.

“86% of experts surveyed on this topic said out-of-cycle rate increases are likely to continue in 2017.”

Mortgage broker and director of Mint Equity Zac Peteh said he believed interest rates would fall even lower in 2017- but also warned customers banks would be reluctant to pass on savings to consumers.

“2016 saw the lowest recorded RBA official cash rate, and we think it can go even lower in2017,” Mr Peteh said.

“There will be pressure from the government for the banks to pass on the rate cuts should they happen in February but we believe the banks will be protecting their profit margins against anunstable market.”

“We also believe the banks will increase their variable home loan interestrates as soon as the official cash rate increased.”

Mr Peteh also predicted banks would continue tighten lending conditions in 2017.

“We’ve seen over the last 12 months’ borrowers reclassified from low to high risk categoriesby lenders because of their employment type, purchase/finance reason and living expenses based on how many dependants (children) they have,” Mr Peteh said.

news.com.au / January 20, 2017

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