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Is the RBA likely to change the cash rate in 2015?

Wednesday, 7th Jan 2015
Categories: Finance, Newsletter

interest rate graphic

Property investors have enjoyed access to cheap finance in recent times as Australia’s official cash rate has remained at a record low for 17-months consecutively, but what’s in store for 2015?

The Reserve Bank of Australia (RBA) last changed the official cash rate in August 2013 when the bank cut the rate by 25 basis points to 2.5%.

RBA governor Glenn Stevens noted recently that the historically-low cash rate had flowed through to consumer interest rates, which were “very low and have continued to edge lower over the past year or so as competition to lend has increased”.

The lower interest rates on offer have created a good environment for property investors to access cheap finance, as lenders battle to grab their share of the home-loan market.

But what will happen in 2015? Will the RBA continue to hold the official cash rate at 2.5% or is there a chance that it might be changed?

Over the past year Glenn Stevens has largely been pushing the same message – “the most prudent course is likely to be a period of stability in interest rates”.

This was again reiterated in the RBA’s most recent meeting on December 2. However, since then there has been a growing chorus of industry analysts predicting a rate cut in 2015.

This includes a range of investment banks and asset managers, as well as two of the biggest banks in Australia – Westpac and NAB.

Both Westpac and NAB believe the RBA will make two separate cuts in 2015 to reduce the official cash rate to 2%.

These predictions came in late 2014 after national business conditions remained flat and sentiment weakened, along with further falls in commodity prices.

Given the present economic conditions, the large majority of analysts are predicting rates to remain on hold or to be cut in 2015.

The Commonwealth Bank of Australia recently changed its stance on interest rates. The bank had predicted that the RBA would increase rates in 2015 but now anticipates they will remain on hold for the entire year.

Meanwhile, ANZ’s latest forecast, issued in November, predicts rates to rise in late 2015.

Either way, the forthcoming 12 months will prove to deliver favourable conditions for property investors to access cheap finance.

Furthermore, it will also be a good time for property owners with established mortgages to refinance to secure a better deal.

In 2015 we can expect more borrowers taking up refinance opportunities to lock in record-low fixed-rate products.

The RBA next meets on Tuesday, February 3 to decide whether to change the cash rate or leave it on hold.