Property: Record breaking result
Property reporter Natalie Craig says we are still seeing bargains at the top end of the market.
The Reserve Bank is expected to hold mortgage rates steady tomorrow, giving home buyers at least another month to pay down debts before interest rates begin to rise.
However, investors are expecting the interest rate to rise to 5 per cent within the year, data from Credit Suisse shows, as the central bank responds to the stronger-than-expected performance of the Australian economy in recent months.
Raising the cash rate by that amount would increase the average monthly repayment on a 25-year, $300,000 loan by about $330 per month. The RBA's cash rate has been at the "emergency" level of 3 per cent since April.
Analysts also expect the RBA to begin raising rates at their monthly board meetings.
"Every meeting from now on carries the real risk that the bank will begin its tightening cycle," said Westpac chief economist Bill Evans. "However we expect that it will at least wait for the next round of data before moving."
The central bank chopped about $750 from the average monthly repayments on a 25-year, $300,000 loan since the global financial crisis accelerated in September last year, hoping to offset an expected slowdown in the Australian economy.
Mr Evans said a slew of economic data will be released between the September and October RBA board meetings giving the central bank a better view of the economy's progress. Data to be released includes readings on retail sales, building approvals, business and consumer confidence.
Also, the report card on the Australian economy's growth - gross domestic product - will be released on Wednesday, followed by an update on unemployment next week.
In comments made earlier this month, RBA governor Glenn Stevens called the 3 per cent interest rate level an "emergency" level.
The average standard variable interest rate on a mortgage held by the big four banks is 5.78 per cent, according to Canstar Cannex. Commercial banks in part set their mortgage rates on the RBA's cash rate.
czappone@fairfax.com.au
BusinessDay
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