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The head of a prominent Australian mortgage group has predicted the official interest rate will remain on hold well into 2017 as the RBA processes the early stages of Donald Trump’s US presidency.
1300 HomeLoan managing director John Kolenda said that today’s RBA board meeting – the final of the year – is likely to see the bank leave its cash rate on hold at 1.5 per cent.
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He explained: “There is a lot of confusion about interest rates coming off the back of the hysteria surrounding Donald Trump’s election and what that means for the US and the global economy.”
“The RBA will most likely sit on the fence post the Christmas surge and wait for more robust economic data through the first quarter of next year before we get real clarity about the direction of official rates.”
Mr Kolenda added that it appears fixed rates have “bottomed out”, which has put pressure on the cost of funds for lenders.
He highlighted that the government is currently focusing on the performance of banks, and thus it would be “unlikely” for lenders to raise their variable rates out of cycle to cover any increase in funding costs.
“They have targeted fixed rates because they don’t get the attention variable rates receive,” he said. “We are likely to have to see several months’ data before we know where rates will go.”
“But at this stage it’s more likely to be a rate rise rather than a decrease but there are many obstacles to navigate before we see the way forward,” he concluded.
