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How long will low rates be around for?

1 May 14

The low interest rate environment has given plenty of South Australians the incentive to get onto the property ladder for the first time - but how long will these favourable conditions last?

When the Reserve Bank of Australia (RBA) made its latest cash rate announcement on April 1, there was widespread belief that rates of interest could remain low for some time.

RBA Governor Glenn Stevens said "on present indications, the most prudent course is likely to be a period of stability in interest rates", which many analysts took to mean the good times would continue for property buyers.

However, not everyone is convinced that the all-time low of 2.5 per cent will stick around for much longer, including HSBC Chief Economist Paul Bloxham.

Speaking to News Limited, he said that while rates will stay low for the next few months, increases could take place before the year is over.

"History tells you that the RBA doesn't usually leave interest rates at a very low level for too long," he commented.

"I think the signals are there and not before too long the RBA will have to start lifting interest rates."

So what is likely to cause the RBA to review its current monetary policy settings? Mr Bloxham believes "over exuberance" will emerge in the national housing market, leaving the RBA will little choice but to take action.

In light of this, anyone with real estate training is likely to be telling potential buyers to act now rather than biding their time, as this low interest rate environment could be short-lived.

The cash rate was lowered by the RBA seven months ago, so many buyers have already taken advantage and bought property throughout South Australia and beyond.

Whether you opt for a fixed-rate home loan or another product, make sure you carry out research first to ensure it is best suited to your needs.

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