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One industry veteran has predicted home loan rates will remain at the current historical lows for the next 10 years, with the Reserve Bank unlikely to return the cash rate to “normal” levels.
John Kolenda, managing director of 1300HomeLoan, said the current cash rate of 1.75 per cent will become the “new normal”, with consumers more sensitive now to the impact of higher interest rates.
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“We are unlikely to see official interest rates move to pre-GFC levels and the standard norm of the future will be lower than historical levels for the next decade,” he said.
“The monetary policy game has changed and the RBA has found cutting its cash rate is not necessarily an instant remedy for economic stimulus.
Conversely, Mr Kolenda said if the RBA increases the cash rate in the future, it could have a disastrous impact on consumer confidence and the economy.
“Consumers are now very rate-sensitive, and when they rise they are likely to stop spending and revert to saving,” he said.
“This is why we will see rates remain at historical lows or around levels we have experienced for the last number of years. Over the short term, it will likely be lower.”
Mr Kolenda noted that the cash rate has been below what was once considered the normal level of 5.0 per cent since November 2008, when the GFC was at its peak.
“The GFC has been a game changer as far as interest rates are concerned and it’s hard to imagine when they could ever return to those pre-GFC levels,” he said.
[Related: CUA makes significant rate cuts]
