Here’s a bit of welcome news for mortgage holders: Australia’s record-low cash rate is likely to remain in place until 2023, according to leading economic and property experts.
In March, the Reserve Bank of Australia (RBA) called an emergency meeting, cutting the cash rate for a second time that month and taking it to a record-low of 0.25%.
It capped off an action-packed 12 months, with a total of five rate cuts since May 2019.
But for avid followers of the RBA’s cash rate, “the next few years are likely to be pretty boring”, says AMP Capital chief economist Shane Oliver.
The outlook
CoreLogic, the nation’s largest provider of property information and analytics, predicts the cash rate will stay at 0.25% until 2023.
“The RBA has previously been clear that the cash rate won’t move higher until inflation is well within the 2-3% target range and labour market indicators are trending towards full employment, implying an unemployment rate around the 4.5% mark,” says CoreLogic.
However, the RBA has recently indicated unemployment is likely to peak around 10% in June and inflation could turn negative over the coming months.
“Arguably, it’s safe to assume neither of these indicators [inflation or unemployment] will be in a position to trigger an increase in the cash rate target for at least the next couple of years,” CoreLogic adds.
Westpac Chief Economist Bill Evans agrees with that timeframe, as does AMP’s Mr Oliver.
“We expect that the overnight cash rate is unlikely to be lifted before December 2023,” says Mr Evans.
What does this mean for your home loan?
Put simply: the current cash rate means extremely low mortgage rates, and tough competition amongst lenders.
“Average variable mortgage rates for owner-occupiers are below 3% while investor variable mortgage rates are in the low 3% range,” CoreLogic says.
“Fixed-term mortgage rates are even lower. Such a low cost of debt is a key factor that should help to support housing demand as the economy emerges from the COVID-19 hibernation.”
So what’s your next step?
Well, with all the above in mind, now’s a great time to consider your refinancing options.
And CoreLogic says it’s already seeing more and more homeowners do just that.
“We continue to see refinancing … at elevated levels relative to the same time last year as mortgagors seek out the most competitive interest rates available,” it says.
So, if you too would like to explore your refinancing options, then please get in touch – we’re ready to jump into action and make it happen for you.