Get ready for more money in your pocket – Westpac is predicting interest rates will fall by another 0.25 per cent this month and as much as one per cent by the end of the year.

Westpac had previously predicted the cash rate would fall to 3.25 per cent, but now expects the cash rate to bottom at 2.75 per cent.

“These two extra cuts are based on our assessment that the global environment – read Europe – has deteriorated even further since we revised down our call for the low point from 3.75 per cent to 3.25 per cent,” Westpac chief economist Bill Evans says.

“We expect further cuts in July and August to be followed by a final cut in the December quarter.”

Westpac also expects more borrowers to take up fixed rates, but warns the market is facing “extreme uncertainty” due to the European outlook and the US recovery losing momentum.

“Our forecasts are based around a general outlook, that while Greece is unlikely to leave the Euro, the European scene will be marked by rolling crises and bailout packages against a backdrop of protracted recession in the region. That would avoid the ‘worst case’ scenario that might be partly priced in by the market, but would ensure an ongoing drag on confidence, both consumer and business, in this country.”

However, while interest rates may be coming down, the Aussie dollar appears to be on the up again – Evans expects the Australian dollar to be higher than the US dollar by the year’s end.

“In the near term, adverse global developments, occurring before any adequate policy responses can be put in place, could see the AUD (Australian dollar) move towards 95 cents over the course of the next few months.”

Source: Australian Property Investor. Read original article here.