Home loan interest rates my rise before the end of the year

As expected the RBA kept the cash rate on hold at 4.50%.  Rates have been on hold since June. Some banks are whispering the cost of funds are increasing so there is a very slim chance of them raising rates above the RBA at the next opportunity. With another rate rise the non bank sector will be much more competitive so hopefully that will keep the big player in check.

China’s growth is slowing to a more sustainable pace over 2010. European growth has improved over 2010 but is forecast to weaken next year. The US economy is expected to slow.

The domestic economy is close to trend growth rates based on the recent data. The employment market has firmed firmed over the past year as growth has improved.

The banks  appear to be have a greater willingness to lend which is good news for small business as housing credit growth has slowed in recent months and upward pressure on house prices appears to have eased.

Interest rate levels for most borrowers at the average levels experienced over the past decade.  Current interest rate settings are regarded as appropriate by the RBA Board given the likelihood that trend growth will continue and inflation will remain within its targeted band.

In my view the is a good possibility of another rate rise by the end of this year. GDP growth is near its trend rate, the jobs market continues to improve and inflation is expected to run to the top end of the RBA’s target band.


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