How Low Will Interest Rates Go?

To the surprise of few in Liverpool, the official interest rate dropped again this month to the new amount of 3.5 per cent, which is the lowest that interest rates have been since November 2009 amid the Global Financial Crisis.

The futures markets is currently predicting that interest rates will drop even further before the year is out, with predictions that a further 1 per cent drop could be in store for the Australian economy.

Depending on global markets and how well the Australian economy performs, it’s possible that the official interest rate could be as low as 2.5 per cent by Christmas time.

This could mean that the average basic home loan product could be around 5.1 per cent by the end of the year, but that’s only if the banks decide to pass on the full cut which is probably fairly unlikely, though it would make for a nice Christmas present. So far most banks have only been passing on at least a portion of the interest rate cuts, though any cut can still help homeowners get ahead on their repayments.

It will be interesting to see how low interest rates go this year – what are your interest rate predictions for this year? Do you think the banks will stay in line with the cash rates set by the Reserve Bank?