ABC News – 17 October 2008Homeowners will have more cash in their pockets if analysts are correct (AAP: Alan Porritt).

The ANZ Bank expects interest rates to fall to 4.5 per cent by the middle of next year.

Earlier this month, the Reserve Bank of Australia (RBA) cut the cash rate by one percentage point from 7 to 6 per cent.

Financial markets are expecting official interest rates to fall below 4 per cent by March next year.

But the head of Australian economics at the ANZ Bank, Warren Hogan, does not believe rates will fall that much.

“They are pricing in a very rapid reduction in interest rates, a 75 basis point rate cut in November and followed up by another in December [and] a total of 200 to 225 basis points of rate reductions by the end of our summer,” he said.

“The cash rate is expected to around 3.75 per cent by March in terms of current market pricing.

“I think that’s where the consensus of economists is settling somewhere between 4.5 and 5 per cent.

“The RBA needs to take interest rates down quite aggressively over the next six months but not to the extent suggested by market pricing at the moment.”