In good news for home buyers, the outlook for interest rates is looking increasingly optimistic with many economists confident the RBA has done its dash in terms of interest rate rises for the time being.
“…As the positive effect of fiscal stimulus programs fade, there will be less upward pressure on interest rates,” BIS Shrapnel’s Building in Australia 2010 report read.
“Continuation of relatively favourable interest rates should encourage a recovery in first home buyer numbers over the first half of 2011,” it said.
But while the RBA may refrain from hiking the cash rate up at any point soon there is continued speculation that the banks will continue to move interest rates upwards out of sync with the central bank.
According to an article in the Australian Financial Review today, a report by Morgan Stanley found Australia’s big four banks face a $700 million drop in profits in 2011 if funding costs continue to increase.
Morgan Stanley analyst Richard Wiles said the banks would have to raise their rates by between 0.1 and 0.15 of a percentage point above the RBA’s cash rate.