Record-low interest rates here to stay

Financial analysts say record-low interest rates are here to stay for the rest of the year.

The Reserve Bank of Australia board meets next week and is expected to keep the cash rate at a record low 1.5 percent.

Digital Finance Analytics principal Martin North said the cash rate had reached the bottom of the current rate cycle and would remain stable.

“The RBA cash rate is likely to stay put for several months, and well into next year,” he said.

But Mr North warned that financial institutions were likely to move on interest rates in the new year.

“I suspect that mortgage interest rates will rise as we move into the new year, thanks to tighter funding and recent deep discounting which is currently easing,” he said.

“On the other hand, rates on savings in the bank will stay rock bottom, as the banks repair their margins and continue to increase capital reserves.”

SQM Research analyst Louis Christopher said new RBA governor Phil Lowe had an eye on the housing market and would keep the cash rate steady in the short term.

“The economy is giving off mixed signals at the moment and the RBA will be increasingly watchful of the housing market,” he said.

“It is likely interest rates could be cut again.”

Lateral Economics chief executive officer Nicholas Gruen went a step further and said an “aggressive cut” in rates was needed.

The RBA board meets on Tuesday.