February 2010 Rate Rise Likely – What will the Banks do?
New inflation data has indicated that the Reserve Bank of Australia will most definitely raise rates at the February meeting. Some economists are predicting a 0.50% rat rise but the general consensus feel it will be 0.25%.
I have heard mixed reports as to what the banks will do. As stated in a earlier post that banks are still concerned about high funding costs. The RBA and other commentators suggest their is no need for the banks to raise rates beyond the RBA recommendation. We will just have to wait and see.
Access Economics have claimed that the major banks are likely to under cut the Reserve Banks reccomended interest rate increases as a PR campaign to win back customers. You can read the full story here.
I am never sure that the majors will miss a profit opportunity and coupled with reports of higher funding costs I think it is highly unlikely the majors will increase rates less than the Reserve Banks recommendation.
Your Mortgage For 2010 – Where are we heading?
It looks like for steam ahead for the Australian economy and this generally means that it looks like interest rates are on the way up. Currently, the RBA have interest rates at 3.75% and economists are predicting a rise to 4.75% before the end of 2010.
Here is a summary of what we can expect for 2010 from the latest news headlines.
- We can expect higher interest rates at the end of the year. Some economists are predicting a rate rise of at least 1 percent
- Banks are still going to complain about higher funding costs and are likely to increase rates higher than the recommended increases stated by the Reserve Bank of Australia. However, this may limit cash rate hikes implemented by the RBA
- Rents are likely to rise in 2010 due to the housing shortage
- Loan defaults are likely to rise as interest rates increase catching out many first home buyers
- Many more to come….
As for the predictions mentioned above they are more likely to happen than not, however, the economy is a living breathing beast and where it leads it is any ones guess.