Borrowers can expect low interest rates for another two years following the Reserve Bank’s decision to leave the cash rate at 0.25%, says financial adviser Alex Jamieson from AJ Financial Planning.
“Property investors can breathe a sigh of relief with interest rates expected to remain low for at least the next two years,” he says. “With the Australian government bond paying only 0.26% on a two-year term, this provides us with some indication of where the markets think the interest rates are headed, which is nowhere. The market is pricing in no material hikes for the next two years.
”AMP Capital economist Shane Oliver does not expect a change in interest rates anytime soon either. “The RBA could drop the cash rate to 0.1% but they don’t want to go to negative rates,” he says. “Even if they did, it would only have a small impact on mortgage rates.”
The RBA says the economic downturn is not as severe as earlier expected and a recovery is now under way in most of Australia.