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What will interest rates do in 2017?

ByAndrew Mirams

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As this year draws to a close, the million dollar question is where are interest rates headed in 2017?

Before we look ahead to next year, however, we need to take a look back over the past two years to understand where rates have been.

In 2015 and 2016, there were a lot of changes in the loan market, including changes to the owner-occupier and investor mix, high and low loan-to-value ratios, as well as interest -only and principal and interest loans, which have all impacted on the interest rate environment of today.

In 2017, many respected economists believe we’re still going to see a 50 basis point reduction to interest rates, which may be two 0.25 basis point decreases next year.

The thing is I don’t necessarily agree with that forecast.

Rates are at an all-time low and rate decreases aren’t really having an impact on the market apart from fuelling our two biggest property markets of Sydney and Melbourne.

Another reason why I don’t believe that further rate cuts are a good idea – although lower interest rates are always nice –  is that the next policy move really needs to be about stimulation of our economy.

We need more government assistance for big and small businesses to help get more people into jobs.

With more people employed, earning sound incomes, then they’re happy and confident to spend, which will in turn improve our economy.

how-much-can-i-borrow-ad-v2b Continuing to cut interest rates, which are now at 1.5 per cent, would also leave us with very little leverage to reduce them further if we needed to at some stage in the future.

I’d prefer to see interest rates stay where they are in 2017 – I know that won’t be terribly popular with a lot people – but I believe that if you can’t manage your home loan today, with historically low rates, then more reductions probably won’t help you that much.

So, as we say goodbye to 2016, it’s important that you review all your home loans to ensure they’re working as well as they can for your individual financial situation.

If they’re not, or you’d like to discuss your loan requirements for 2017, please feel free to contact us so you start 2017 on the right financial footing.

All the very best for Christmas and the New Year and we look forward to working with you all next year.

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The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.

 

Andrew Mirams
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