Get on top of the mortgage while rates are stable

It's been a dull old time on the interest rates scene in recent weeks with little if any economic news likely to change the outlook for interest rates – they're on hold for the next few months and probably much longer. For those borrowers who aren't doing so already, moderate, stable interest rates combined with high employment and secure incomes offer a good opportunity to make extra repayments and get on top of that mortgage mountain.

The possibility that interest rates might rise later in the year are still there but no closer than they were a month ago. Employment growth has softened, consumer spending has slackened and the housing market is in the doldrums in NSW and flat in most other states. This all makes for moderate economic growth and with interest rates already at neutral levels – neither high nor low – there is no case for moving rates in either direction.

Inflation (close to 3 per cent) and wages growth (above 4 per cent) will have to be watched, however. Both are towards the top of the tolerance limits that the Reserve bank sets for them and any further rises may bring interest rates rises back onto the agenda. But with the jobs market, retail sector and housing soft it's hard to see inflation or wages going much higher either.

There's not much else to speak of other than an unexpected fall in new car sales in February. But rather than portend some further fall in consumer spending, the 2.1 per cent fall is likely to be a one off blip. While the further fall in 4WDs (down 12 per cent) was expected as the high price of fuel continues to take its toll on this segment of the market, there were also lesser falls in other segments including standard passenger vehicles. But given that the prices of new cars continue to fall in real terms and incomes are rising, strong car affordability probably means sales overall will bounce back in coming months.

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