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The Reserve Bank will meet tomorrow to announce its latest interest rate decision, with a hold on rates the likely outcome, according to a leading economist – news that will bode well with first home buyers seeking to enter the market.
Data released over the past weeks has revealed a stronger than expected domestic economy. GDP (gross domestic product) grew 1.2 per cent in the June quarter, according to the Australian Bureau of Statistics (ABS) revealed, bringing Australia’s annual economic growth rate back to 3.3 per cent – its long term average.
Despite this, ongoing turbulence in international markets is likely keep the Reserve Bank of Australia (RBA) from lifting the cash rate tomorrow, AMP chief economist and regular Smart Property Investment contributor Shane Oliver believes.
“While a run of stronger than expected economic data, culminating in above trend growth in the June quarter, adds to the case for a rate hike, this is likely to be balanced against uncertainty regarding the global outlook and expectations that inflation is likely to remain within the target range over the year ahead,” he says.
Nevertheless, borrowers should prepare for higher interest rates in the near term, according to Mr Oliver, as the RBA moves to help keep household spending in check and to ensure the mining boom does not overheat.
For first time buyers this means factoring in higher interest rates when it comes to considering your borrowing capacity.
To be on the safe side consider your ability to service a mortgage with an interest rate of at least two percentage points higher than those on offer at the moment.