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Four to the Floor

By Cathy Pieroz

A prediction by Westpac’s most senior economist Bill Evans that the Reserve Bank (RBA) is likely to cut the official cash rate another four times this year is not to be taken lightly. After all, Evans is the man who in July last year was already predicting rates would be slashed at the end of the 2011, at which point the RBA was still considering increasing rates.

Evans is now saying we can expect 25 basis point cuts in June, July and August, plus one other cut before the end of the year. If he’s once again correct, the official cash rate will be at its lowest level ever, taking the standard mortgage variable rate to around 6%.

It may well be good news for the property market, as there will no doubt be a positive impact on affordability and ideally, on consumer confidence as well. But any predictions should be viewed with caution, as the latest research from RP Data shows the most recent three rate cuts have not had the desired effect on consumer confidence with property values in capital cities now having fallen to their lowest level in six years.

Both buyers and sellers need to bear in mind that rates only fall when the economy is challenged and that there is real risk in either side waiting to act with an expectation future conditions will be better than the current environment. The best property decisions are made with the individual’s personal circumstances and the current market conditions clearly in mind.

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