Interest Rates Stay at 4.5%, But What Does the Future hold?

Interest Rates Stay at 4.5%

Melbourne mortgagees, buyers and would-be vendors can all breathe a collective sigh of relief – as the Reserve Bank indicates rates are likely to be held at 4.5% for sometime.

 

With the nation still reeling from the floods in Queensland, Victoria and Northern NSW, the Reserve Bank of Australia (RBA) is waiting to see just what toll these natural disasters have on the economy before making any further moves to interest rates.

 

This of course amounts to some welcome relief for anyone with a home loan or considering taking one on. It also gives people thinking of selling their home a boost of confidence in the market.

 

So, what can buyers and vendors expect from interest rates in 2011? RP Data’s director of research Tim Lawless says any movement in property values this year will be largely dependent on official interest rates.

 

The futures market is factoring in some smaller rate increases (amounting to less than a percentage point) between now and March 2012. But after this month’s decision, many experts are tipping home owners will get through until May or June before copping a rate increase.
Mr Lawless says more than one rate increase before March 2012 would result in a fairly stagnant year for property prices. But if we can get by with just one increase, “Australian dwelling values have a good chance of realising higher-than-expected gains,” he says.

 

His predictions came with the release of the RP Data-Rismark Hedonic Home Value Index, which found Melbourne outperformed all the other capital cities for capital growth in 2010.