At Premium Finance Services we specialise in the structure and restructure of debt to help our clients reduce bad debt and use good debt to create wealth. The use of debt to improve our client’s financial position relies on being able to structure finances so that they are worry free, hassle free and risk free and this requires an understanding of interest rates and their likely future direction.
Like most other in the financial services industry Premium Finance Services believes that interest rates are likely to move up – but when will this occur and what are the triggers?
Many economist believe it is the labour market, and not the housing market, will be the key to the next interest rate rise.
So this raises the question: if the RBA doesn’t have to raise rates earlier, then why would they? The labour market is important here and currently some weakness is still expected. Further, the unemployment rate is still rising and will continue to do so. Given the benign outlook for inflation, it would seem the RBA is in a position to take the edge off this increase, by holding off on rate hikes for a few months. (You can be sure the government would be appreciative heading into an election year). The ANZ bank believes that, in the absence of a strong and sustained turnaround in the labour market, remains for the first hike to come early next year.
The ANZ bank notes that some commentators suggest the recent rise in house prices will be the catalyst (interestingly some former housing doomsayers have now converted to a housing bubble story). This seems unlikely in most regions because median prices have only now recovered to levels seen in 2008 and much of this rise has been driven by subsidised first homebuyers. From end-September the boost the FHOG is scaled back and by the end of December it will be gone. This will no doubt dampen what has been frenetic buyer demand going forward. Upgraders and investors will increasingly support market activity, yet price gains in the next six months are unlikely to match what has happened over the past sixth six months, largely solving any perceived problem for the RBA.
The two regions of strongest population growth in Australia, South East Queensland and Greater Melbourne, are expected to remain the strongest residential housing markets over the medium to long term.
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