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A further cut to the official interest rate might have been seen as radical just a month ago, but a growing number of experts are backing this prediction in the lead up to 2015.

At its last meeting for the year, the Reserve Bank has left the cash rate on hold at 2.5 per cent for the 16th consecutive month and has restated that it is unlikely to change any time soon.

Rates have been at a 60-year-low, but three of the 37 panellists surveyed by finder.com.au say it could drop even further.

Meanwhile the majority of experts are tipping a rate rise next year, while two remaining panellists are forecasting no change until 2016.

Domain Group senior economist Andrew Wilson, who is predicting a cut for the second consecutive month, said there was no reason for a rate rise with cooling house price growth.

“With still signs of a weakening economy, I think we’re starting to see more of a case building for perhaps a fall in interest rates by mid next year,” he said.

“The issue to do with over-priced housing markets is now being taken off the table.”

Dr Wilson said the Sydney market was still performing strongly but its auction clearance rate was waning, and Melbourne’s property market would “be lucky to grow at about the inflation rate this year”.

On Tuesday, the Deutsche Bank also joined the growing number of experts who are expecting the cash rate to be slashed further next year due to high unemployment and slowing household income growth.

They have predicted two quarter-point reductions, which would bring the the cash rate to a record low of 2 per cent.

NAB chief economist Alan Oster does not expect a rate rise until the end of 2015.

“While there are tentative signs of an improvement in household spending, they do not yet signal a sustained change in household and business conditions,” he said.

“In the absence of any major surprises, the cash rate is unlikely to rise until late next year as monetary policy commences its return journey to normality.”

LJ Hooker chief executive Grant Harrod said the RBA’s decision to leave the rate on hold should keep the market buoyant over the typically quieter holiday period.

“There has been a lot of speculation about when rates will rise and as a result we expect many homeowners who have been sitting back watching the market are likely to act in the early part of 2015,” he said.

“They will want to make the most of this period of stability before it potentially becomes a buyers’ market.”


Posted by Christina Zhou – Domain (The Age) on 2nd December, 2014