Good news looks likely for homeowners, with mortgage interest rates looking likely to drop further in the near future.
Home loan rates have already fallen from their high of 9.70% back in May. You can currently get a rate of between 9.20% and 9.40%, depending on your bank and fixed term.
Home loan rates are set to fall further. Wholesale rates (the rates at which banks fund) have fallen a further 0.20% this week, in anticipation of the Reserve Bank dropping interest rates on 25th July. Nothing is certain, but the Reserve Bank will not have failed to notice the weak state of our economy and the fact that homeowners are re-fixing their mortgage at higher rates (effectively still reducing spending).
We expect interest rates to fall 0.25% in July, with a further 0.25% in September and a further 0.50% before March 2009. This is a view we have been expressing for a few months.
The major banks have talked about “higher credit costs” but these are already factored into current pricing and margins are their highest in some time. The slow-down in housing volume is likely to see banks compete with each other for business, which means offering lower rates to customers in an effort to win them over.
We are expecting to see the one-year fixed home loan rate to drop to around 9.20% later this month (and for the two-year rate to drop to 8.95%.) By September the one-year rates should be below 9% and by March 2009 rates will be around 8.50% – or possibly even lower.
