Christmas bonus for home owners: Interest rates have peaked

Home loan borrowers can rest easier this Christmas in the expectation
that variable interest rates have peaked for the current cycle and the
next move in interest rates could well be down.

This is the view of consumer information provider InfoChoice Ltd, formerly
Market faxts, which has kept a regular watch on interest rates and the
economy for the past seven years, now via its banking information website
BankChoice.com.au.

After the release of economic indicators here and overseas this week,
InfoChoice has concluded that current economic signs point to a slowing
in our economy in 2001 which should take the heat out of current inflationary
pressures.

Indeed, financial markets have begun to price in falling interest rates
next year with recent falls in bond market yields flowing through to lower
rates on fixed home loans and term deposits.

InfoChoice Chief Executive Chris Gosselin said: “Although predicting
future moves in interest rates is never a practice that can be pursued
with certainty, the indications are that economy will slow next year significantly
enough to offset the inflationary effects of the low dollar and higher
oil prices.”

The heat is coming out of domestic economy with flat consumer confidence
and a housing industry that is in a major slump. While exports are going
gangbusters and underpinning economic growth this year, signs of slowing
economic growth in the US emerging this week will dampen this export influence
next year.

Today’s Australian release of October retail sales figures only adds
further weight to the scenario. Retail sales fell by 0.2 per cent over
the month after expectations of a post-Olympics rise of around 0.8 per
cent.

Reserve Bank Governor Ian McFarlane’s parliamentary testimony in Wagga
today confirms its recent view that economic growth will slow next year
and that while inflationary threats exist, they should remain moderate.

The Reserve Bank board meets next week for its monthly decision on interest
rates and Mr Gosselin believes there is very little chance of any change
either way. “Recent signals from the RBA suggest the board is of the view
that rates are finely balanced at the moment and should stay on hold for
the time being until more definite signs of economic direction appear,”
he said.

The Olympics and the introduction of the GST have distorted a number
of key economic indicators in recent months and, amid predictions of higher
inflation and the need for more interest rate rises, the RBA has adopted
a ‘wait-and-see’ attitude in recent months.

“Now, with increasing signs of a slowdown, this approach appears to have
been validated and the RBA may well find itself leaning towards rate cuts

next year.”

Of course, falling interest rates are a double-edged sword — bad
for those who rely on interest income to live on or build wealth. Term
deposit rates have begun to fall and savers should make the most of higher
rates while they can.

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For more information:
Chris Gosselin
Chief Executive Officer
InfoChoice Limited
PH: [02] 9247-6788
MOBILE: [0411] 537 830

Tim Allerton
City Public Relations
PH: [02] 9281 7272

Note to editors:
At its annual general meeting in Sydney yesterday, Market faxts Ltd shareholders
approved a resolution to change the name of the company to InfoChoice
Ltd.

InfoChoice.com.au is Australia’s
leading infomediary, providing independent, comparative data for consumers
in the banking, telecommunications, investment, travel and insurance markets.