Macroeconomists who meet before each RBA meeting to make probabilistic predictions have shared a change in sentiment before the September cash rate is announced later today.
The Australian National University RBA Shadow Board reported an uptick in conviction that the interest rate should remain at 1% for September, up to 71% from last month’s 68%.
Further, the estimated probability that the cash rate should remain at 1% for the next six months is also up this month, having risen to 34%.
The shadow board noted consumer confidence in Australia increased 3.6% in the last month, possibly reflecting a surge in confidence following the recent interest rate cuts.
However, the belief that additional cuts are forthcoming seems to have left borrowers reluctant to lock in rates despite their record low levels.
There are currently 22 three-year fixed rate home loans for owner-occupiers with rates under 3% according to comparison site InfoChoice, with four further four-year rates also coming in below the 3% mark.
Despite this, search trends on InfoChoice reveal that borrowers are sticking with variable rates, despite the long and low fixed rates on offer.
“We think the RBA will resist further rate cuts as long as possible - to wait for more evidence of the effect of previous cuts in June and July before moving again,” said Vadim Taube, InfoChoice CEO.
“However, the RBA has been very clear with its messaging that more rate cuts will come if necessary, [and] Aussies…expect rates to stay low or go even lower.”
