Cash rate to hold today, rise in 2017: RateCity

The Reserve Bank is likely to keep the official cash rate at its historic low of 1.50 per cent when the board meets today but move on rates next year, a mortgage comparison site has predicted.

A RateCity.com.au analysis of over 30 key economic indicators suggests that the Reserve Bank’s easing cycle has ended, and that the likelihood of a rate hike next year is mounting.

“Australians should get ready for rates to go up next year to cool our hot housing market,” data insights director Peter Arnold remarked.

Mr Arnold highlighted that banks have already started moving their fixed rates higher, with Westpac the first major to do so.

“With that many lenders [are] moving fixed rates up, it’s the best sign that we have that a variable hike is on the way,” he concluded.

Mr Arnold pointed to findings from international forecasters, namely the OECD, which said that rate hikes are needed to “unwind tensions from the low-interest environment, notably in the housing markets”.

He added that there have been two “upsets” for the housing market last week, namely that new house sales have dropped to their lowest level in two years and NSW premier Mike Baird has added his support to negative gearing tax rules.

“The good news is that the unemployment rate is set to stay low and economic growth is strong, as are commodity prices,” Mr Arnold said.

“The Federal Reserve is getting closer to lifting interest rates with markets indicating a December hike is imminent, meaning less pressure on the RBA to move with urgency. Nevertheless, we think a rate hike is likely for next year.”

[Related: Rate hikes on the horizon, says mortgage boss]

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Francesca Krakue

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