Australian punters are showing signs they believe the low interest rates have hit bottom, according to a leading economist.
According to Andrew Wilson, senior economist at Australian Property Monitors, consumers are sending messages to the big banks that interest rates are at the bottom.
“What we are seeing over the last couple of weeks is mortgage holders and home buyers locking in fixed interest rates,” he told Real Estate Business.
“There is a perception that perhaps the cycle has bottomed out and the punters are moving to lock in those fixed interest rates.”
While the Housing Industry Association (HIA) has called on Australia’s banks to buck the trend and lower their standard variable rates out of cycle with the Reserve Bank.
Earlier this week, the Reserve Bank of Australia (RBA) said it was prudent to leave the official cash rate on hold at three per cent.
But despite the board’s decision to leave rates untouched, HIA senior economist Shane Garrett believes there is room for the banks to move on rates.
“The decision by the RBA to hold interest rates…places even more pressure on banks to take the lead on this front,” Mr Garrett said.
“Despite the 175 point reduction in the RBA rate since late 2011, the discounted variable mortgage rate has only come down by 140 basis points and even less of a reduction in lending rates for small businesses.
“With the RBA’s own research indicating a fall in the banks’ wholesale lending costs over the past few months, the time for lenders to pass on the full RBA cuts is long overdue.”
Mr Garrett said while the RBA based its decision on what it views as a satisfactory balance between recent economic growth and inflation data, core sectors of the economy including residential construction and small businesses are experiencing their most challenging conditions.
"The strength of the mining and natural resources sector means that the weakness of certain other sectors has been masked in aggregate economic data releases,” Mr Garrett said.
“The cautious approach of the RBA to further interest rate reductions means that banks need to act quickly to support activity in the traditional economic sectors.”