Rates to go up another 0.5 per cent

The Reserve Bank of Australia is expected to raise the official cash rate by another half of one per cent by the end of 2010 according to Westpac chief economist Bill Evans. That would take the cash rate from 4.5 per cent currently to five per cent, and push retail mortgage rates up to around 8 per cent.

Mr Evans said the housing market should experience a slowdown before the end of the year, which should prevent rates from exceeding 5 per cent. “Rate rises and lower first home buyer demand have already impacted heavily on housing finance approvals [down 28 per cent from their September high],” he said. “Historically, swings in finance approvals have usually been a good gauge of demand, impacting with a lag of about six months.”

Source: The Advisor

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