Where to for Australian Interest Rates in 2010?
Welcome back!
Interest Rates have risen dramatically in recent months on the back of the RBA increasing rates by 0.75% upon stronger economic conditions in Australia.
What does 2010 have in store for the home owner and the average investor dependant on interest rates? Well one thing would appear certain, we are headed for higher interest rates again in 2010 as the economy looks set to continue the miracle of the last 20 years.
With the RBA rate set at 3.75% and the focus on moving towards a non-inflationary rate (around 5.00% at least as conditions improve) then we can expect to test 4.25-4.50% in the first six months of the year. A big early year trigger will be holiday consumption and Christmas sales figures that will influence any decision by the RBA in February.
Meanwhile, the banks appear hungry to increase rates in excess of the RBA rate as evidenced in the November rate increase. With banks keen to maintain or even increase margins to offset increased funding costs this will be another clear trend in 2010.
Expect interest rates to tick higher early in the year and as the world economy rebounds, the UK and US will be pivotal, the RBA will have little option to increase rates. All this means that 2010 will be tough year for homeowners and will give pensioners and those dependant on fixed interest rates some solace after the last few years of low savings account interest rates.
It is hard to see home prices showing any real growth in 2010, at the top end expect decent rises as the wealthy once again impose themselves on the top end of the property market after a restrained period in recent years.
What do you think 2010 has in store for interest rates and the Australian economy, share your thoughts?