Good news for hard-pressed home buyers from BJM PCS

Belt-tightening by hard-pressed home buyers is likely to be rewarded by deeper and more prolonged rate cuts than at first expected.

That’s the reading of recent economic data by Barnard Jacobs Mellet Private Client Services (BJM PCS), a firm more noted for personal investment consultancy to high net worth individuals than words of comfort for those struggling to meet bond repayments.

“On the local front economic growth forecasts have been downgraded and we have had a further 1% interest rate cut,” says Mark Appleton, chief investment officer at BJM PCS. “Short-term interest rates will probably go lower than originally thought and we now estimate that there could be upwards of 350 basis points of cuts still to come.”

That means rates could come down a further 3.5% in the months ahead.

Lower rates means smaller bond repayment bills for home buyers and lower risk-free returns for cash savers and investors in fixed-interest products. At some stage, increasingly modest yields outside the share market will encourage a return to equity investment.

But, in its latest report to its client-base of wealthy individuals and families, BJM PCS says caution is still advisable on the equity front.

Appleton advises: “While we remain of the view that there is long-term value in the equity market, we also believe it to be prudent to continue to adopt a cautious stance with regard to growth assets until such time as the global outlook starts to clear.”