Inflation figures good news for borrowers

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The latest inflation figures from the Australian Bureau of Statistics are good news for borrowers across the country according to one real estate body.

The Consumer Price Index (CPI) for the December 2015 quarter was released yesterday and inflation measure within it indicate the current environment of low interest rates in Australia is likely to continue.

“In the December quarter, the CPI rose by 0.4% and an annual rate of 1.7%. These figures are well below the RBA’s target zone of 2-3% and should ease any pressure on the interest rate outlook,” Real Estate Institute of Australia president Neville Sanders said.

“This means that we can expect a sustained period of low interest rates which is good news for home owners,” Sanders said.

The inflation figures back up recent predictions by leading economists Bill Evans from Westpac and Shane Oliver from AMP Capital, who both believe the RBA will not increase the cash rate during 2016.

Dr Oliver said global economic conditions could force the RBA into lowering the cash rate to 1.75% this year, but Evans was remains strongly in camp that the official cash rate will remain unchanged at 2% through 2016.

“Despite markets confidently expecting that the Reserve bank would cut rates by February Westpac has remained firmly of the view that the Bank will remain on hold throughout the second half of 2015 and the whole of 2016,” Evans said.

While Sanders said the inflation figures, as well as other current market conditions are good news for buyer, investors may not see the same level of benefit.

“With inflation under control and a moderating housing market, home buyers can expect a stable outlook,” Sanders said.

“The impact of the past increased investor activity in the housing sector is flowing through to the lowest increases in rents in over two decades.”
 

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