A large percentage of consumers believe interest rates will remain on hold in 2011, despite predictions from economists indicating the opposite only weeks ago.
A national survey by mortgage broker group Loan Market revealed that 40% of respondents believe the cash rate will remain at 4.75%. Even more overwhelming was the response from those in the 18-25 age group, with 45% expecting the RBA to leave rates on hold for the remainder of 2011.
The results of the survey reflect the recent poor economic and retail figures released last week. The crisis in the European markets has also affected the consumer mindset.
Loan Market spokesperson Paul Smith said the response from the younger participants is a positive sign for the first home buyer 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.
Smith said there had already been an increased level of interest from first home buyers.
"We’ve seen a 10% jump from first home buyers in June, so obviously there’s a small amount of confidence returning to the market due to interest rates staying on hold.”
Of those surveyed, 24% believed interest rates would increase once, while 20% expect a rate cut by the end of the year.
