 Interest rate predictions for 2009
With economists predicting further rate cuts in the new year, home owners will be watching closely to see by how much. While the Reserve Bank has issued some big one per cent rate cuts in October and December, many forecasters believe that any further cuts will be smaller. Perhaps more in line with the 25 basis point cut in September, or the cut of 75 basis points in November.
The latest cut, of 1% in December, took the cash rate down to a six-year low of 4.25 per cent, and nearly 300 basis points lower than where the rate stood in September.
Several leading economists are even tipping the Reserve Bank's cash rate may sink as low as 2.5 per cent by mid-2009.
"It will head towards three per cent, possibly down to 2.5 per cent by mid next year," AMP Capital chief economist Shane Oliver said.
"I think the pace of the declines will slow down from here. But then again, we said that after the October cut of one per cent. Really, they have front loaded the rates cuts given the threat to growth and a desire to avoid a collapse in house prices. Now they'll just chip away at it."
Commonwealth Bank chief economist Michael Blythe and Commsec chief analyst Craig James both agree, saying they see a 0.25 per cent reduction when the RBA next meets in February.
With each official rate cut, most lenders have passed on the savings to home owners, and standard variable home loan rates have fallen from nearly 10% to below 7% in the past four months. However, Treasurer Wayne Swan has made it clear he is disappointed that not all lenders passed on the latest rate cut in full.
On an average $300,000 variable loan, the combined three per cent interest rate cuts will save homeowners about $560 a month.
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