0.75% Interest Rate Reduction by September 2012

With recent renewed turmoil in Europe, fixed rates have pushed down to a whisker below the levels of August 8. Markets are now predicting that the Reserve Bank’s cash rate will be lowered to around 3% from its current 4.5%. That 3% was the low point in the last rate cut cycle, during the Global Financial Crisis.

Westpac’s chief economist Bill Evans sees the European model as badly flawed and expects it will eventually unravel amid rolling financial crises. But markets probably need even more dire consequences including outright bank failures to justify their expectation that the low point in the cash rate cycle will be back to 3% again.

For property owners lets hope that Bill’s prediction is correct and bring on the interest rate cuts. Hopefully these cuts will get our housing market going again.


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