The USA’s central bank has lifted their interest rates for just the second time since the 2008 GFC and some economists say it’s good news for Australia.
The rate hike in the States has sparked fears it will lead to more rate hikes here at home, but AMP Capital chief economist Dr Shane Oliver says mortgage borrowers shouldn’t be too concerned.
“The resumption of Fed rate hikes is a sign the world’s biggest economy is doing well,” he told News.com.
“To the extent that the Fed’s interest rate hike signals a stronger US, it’s good for Australia.”
“It doesn’t signal that the RBA will soon follow and hike next year though.”
Mr Oliver said that Australia’s weak economy and ongoing low inflation meant the Australian central bank would be more likely to cut rates next year than lift them.
Despite moves from the RBA, our banks have already made moves to lift their rates prior to the USA’s move and have indicated there could be more on the way.
Mortgage Choice CEO John Flavell thinks the RBA will follow suit next and give interest rates a lift.
“The Federal Reserve announcement, combined with the fact that many of Australia’s lenders have started to raise rates across their suite of home loan products, would suggest a cash rate increase by the Reserve Bank of Australia is now more of a possibility than not in 2017,” he told News.com.
“The RBA has previously stated that the easing bias has passed and the latest changes by the US Central Bank would support this.”
“Of course, even if rates rise, it is important for borrowers – and potential borrowers – to keep in mind that interest rates will still be very low by historical standards.”
“Any rate rises are likely to be small, which will help keep the cost of borrowing incredibly affordable. As a result, I would expect certain parts of the property market to remain strong.”