If you’ve been following interest rate movements in Australia then you will know that the official cash rate has remained at the record-low rate of 2.5 per cent since 2013, but most forecasters predict that they will drop to at least 2.0 per cent by the end of this year.
According to SQM Research managing director Louis Christopher an interest rate cut will be on the cards if banking regulator, APRA, imposes investor-lending restrictions this year.
“They will do this in an attempt to reduce risky, speculative investor behaviour, particularly from those who should not be taking on large amounts of housing debt due to their limited capacity to pay it back,” Mr Christopher said.
“However, if APRA does move, it could potentially open the way for the Reserve Bank to make rate cuts, possibly more than the standard 25 basis points.”
Mr Christopher predicts the there will be a rate cut by April 2015 and a second reduction in June.
One of the major reasons that rates haven’t dropped yet is to help prevent a surge in house prices, however with the Australian real estate market starting to moderate it is looking more and more likely that Mr Christopher’s predictions will come true.
When do you think we will see an interest rate cut?