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Most don't expect rate hike
Released 21 July 2011



An interest rate rise in during 2011 is unlikely, according to a national survey mortgage broker Loan Market.    

The Loan Market poll which asked “What do you think the RBA will do with interest rates for the remainder of 2011?” found 40 per cent of respondents thought the cash rate would stay at the present level of 4.75 per cent.

Loan Market corporate spokesman Paul Smith said there was an even stronger response in the 18-25 year age group, with 45 per cent expecting the RBA to stay on the sidelines – as it has done since November last year.
 
Twenty per cent of the 397 survey respondents thought the central bank would reduce the cash rate once while 24 per cent believed there would be one increase and 16 per cent predicted two rises before the end of the year.

“The interest rate landscape is an unpredictable one but with sluggish economic numbers across the board and a recent nose-dive in consumer confidence, a majority of Australians are not expecting any more rate rises during 2011,” Smith said.

“This is a big change from just a few months ago when most economists were forecasting at least one or perhaps two increases by the RBA before the end of the year. Now with an emerging debt crisis in Europe and a soft domestic economy, we could see rates drop before Christmas.”
 
Smith said the strong response from Gen Y about rates staying on hold was a positive sign that more first home buyers would return to the market.

“Gen Y makes up the majority of the first home buyer consumer profile and their belief in interest rates remaining subdued could be the first signs of recovery for these consumer groups,” he said.

“First home buyer activity has been nearly non-existent this year while cost-of-living and affordability issues have kept them on sidelines. With growing sentiment towards interest rate stability, we may finally see more Australians buying their first home.”