Further interest rate cuts in 2015 have been predicted by two of Australia’s big four banks in the past week.
Westpac and the National Australia Bank have revised their forecasts based on weaker than expected business conditions and GDP numbers, with Westpac chief economist Bill Evans predicting the RBA would lower the cash rate when it next meets in February.
And Aussie Home Loans founder John Symond has predicted five-year fixed loans – many currently at all-time lows below 5 per cent – could go as low as 4.75 per cent.
The Commonwealth Bank slashed its five-year rate to 4.99 per cent in July – the first time Australia’s biggest lender had dropped the rate below 5 per cent.
“My tip is we are going to see fixed rates even lower. We might even start seeing 4.75 per cent which is unbelievable,” Symond told Ross Greenwood’s Money News program last week.
Symond revealed in September he had taken five-year fixed loans for his Sydney investment property portfolio, prompted by the sub-5 per cent rates available.
“I’ve never been a proponent of fixed rates,” he said at the time.
“But I’ve got to fess up, this week personally on a couple of properties, I’ve locked away five-year fixed at high 4 per cents which you can get around the market.
“My feeling is I think you’re taking a risk by taking three years because you know rates between now and three years, over the next 12 to 36 months, that’s when probably interest rates will be trekking up.
“… Whereas five years I think you can’t go wrong, you are going to get two or three years premium low rates and I thought ‘you know what, I’m going for it’.
“I’ve looked at it and thought, ‘lowest fixed rates in history, lowest, even if they go down half a percent which I’ll be surprised, hey, you’re within half a percent of the lowest rates in history’.”
The NAB this week predicted the RBA would cut the cash rate by 25 basis points in March and again in August, which would take it to a fresh record low of 2 per cent.
The NAB changed its forecast after much weaker than expected GDP figures for the September quarter and a larger than expected slump in Australia’s terms of trade.
It followed predictions by Deutsche Bank and later Westpac predictions the next move in interest rates will be down.
“I think it will happen sooner rather than later because the situation is in need of repair now, not in six months’ time,” Westpac chief economist Bill Evans said.
“We very rarely change our forecasts but the developments over the last six months … it seems to me that the Reserve Bank is well positioned to take some more insurance on ensuring a lower Aussie dollar and providing some stimulus to the economy.”
He predicted the RBA would cut the cash rate at its next meeting in February and again in March.