No move on interest rates until New Year?

Homeowners can expect interest rates to stay on hold in the lead up to Christmas with the Reserve Bank widely tipped to leave any changes until the New Year.

Economic conditions are currently stable enough to leave rates untouched in December, says QIC chief economist Matthew Peter.

“We can pretty much think the rate movements now are off the table until the New Year, especially given the RBA didn’t move rates at the last meeting,” he says.

“And the commentary out of the statement of monetary policy didn’t give any indication that rate movements were likely going forward.”

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This year saw two rate decreases of 0.25% each in February and May, and 2016 could bring more.

Peter says the RBA passed up a good chance to reduce rates last month, but expects domestic and global markets will force its hand next year.

This year saw two rate decreases of 0.25% each in February and May.

“We thought, and still do, the RBA had a good opportunity to deliver a rate cut that would potentially lift confidence, but we don’t think the RBA is in that space and aren’t considering rate cuts at the moment,” he says.

“They’ve signalled to us now, in the absence of quite a significant deterioration of either the Australian or global outlook, they’re unlikely to be moving rates down soon.

“But next year I think rates are more likely to go down simply because we’re going into a period where growth, particularly domestic demand is going to remain weak.”

The RBA will keep a close eye on central banks around the world, particularly China where interest rates have been cut six times this year and the Federal Reserve in the US where rates are expected to lift.

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The recent terror attack in France is another reason why the RBA will choose to keep rates steady, says Penny Collicoat, financial planner from Edge FP.

“There’s just too many ups and downs with the market and I think France has added a whole level of uncertainty as well,” she says.

“I think China has a large impact on us. We send the most exports to them and if they’re easing, that might reduce rates.

“In the US, everyone was waiting for them to increase their rates at their last meeting, but they didn’t and that won’t happen until early next year now.”

The recent terror attack in France is another reason why the RBA will choose to keep rates steady.

Australia’s lending market remains competitive and consumers should take advantage, Collicoat recommends.

“Have a shop around and see what else is out there,” she says.

“I personally, if I had a home loan, would be shopping around every two to three years, because you’d be mad if you didn’t.”