3.25%

[sash]

Aaahh....the 0.25% increase....no surprise here really....this one is like *****ing an elephants backside. Unlikely to be felt....but a shot across the bow...so the affect is psyche.

I expect another one in Dec. 2009.

The real action begins when rates are about 4% by about mid next year...with a real interest rate of 6.25%. I suspect the banks will increase the rate with their own margins of say 0.1 to 0.25% over the next 12 months.

On a more positive note...I am happy that I have broken even on 2 of my loans with I fixed at about 5.24-5.28%. Next increase I should break even on another 2 rate where I fixed at 5.59% to 5.64%!

Happy days are here again!

 

[Property Meister]

well to be honest, I was a bit surprised that there was little media about this rate rise,

anyway, I know this has been covered befroe but for thosd looking to purchase now, I feel that many sellers are still expecting higher prices in Melbourne in particular, so I get this gut feeling that waiting for 1 month or 2 and purchasing in December might be a better idea.... I might be completely wrong though. rates rising, people haven't felt the real affects of it, so I think that prices won't fall at all, but you might be able to get it a better deal.

Just my complete honest opinion

 

[evand]

I was talking to an agent i know today and he was saying that if there is another rate rise pre Christmas, inquiries will fall off a cliff.

 

[chilliaa]

The next question is.... how much will the banks give us ? 0.25% ? ...or a little more ?

The last paragraph is telling - using the word gradually is a bit of a softener.

I think you have identified the logic that the RBA is trying to present.
I would also highlight the words 'lessening the stimulas'. ie no mention of a neutral interest rate setting, just a pullback of expansionary interest rate settings.

 

[steveadl]

I think you have identified the logic that the RBA is trying to present.
I would also highlight the words 'lessening the stimulas'. ie no mention of a neutral interest rate setting, just a pullback of expansionary interest rate settings.

That's the key point I think a lot of people are still missing.

In late 2008 and early 2009, the cash rate was lowered quickly, to a very low level, in expectation of very weak economic conditions and a recognition that considerable downside risks existed.

The rate was lowered all the way down to 3% on expectation of very weak economic conditions. In reality, the economy hasn't fared as badly as expected. Therefore RBA needs to bring it back up to a level which is still stimulatory but not as drastic as 3% which could overheat the economy.

I realise it's more complicated than just the fed rate, but I'd hate to see Aust. go the way of the US and have a ridiculously low rate that will be very hard to reverse back to a normal level without hurting the economy in a big way. The longer the RBA left/leave the rate this low, the harder it would be to raise it back up again, and we would end up with a whole lot more excesses in our financial/economic system.

 

[Aaron Sice]

I was talking to an agent i know today and he was saying that if there is another rate rise pre Christmas, inquiries will fall off a cliff.

enquiries are always waiting to fall off a cliff for an agent - the world is the problem and everyone should want to sell their house with an agent and then rent back with the new buyer putting them on as PM for the old owner as the existing tenant.

that would have to the RE agents DREAM - anything short of that is whinge material.

 

[Aaron Sice]

if the rest opf the world pumped their IRs back to 3.25% what would happen?

i think the RBA were good in the 0.25% raise, but any more could signal another strangle.

 

[evand]

I find agents are mostly unrealistically positive. They never talk the market down, business is always good, prices will always rise, the election will mean more inquiries, Easter will mean more inquiries, Spring will mean etc etc....

They all trot out the same overly positive stuff.......for an agent to say that to me, means something.

enquiries are always waiting to fall off a cliff for an agent - the world is the problem and everyone should want to sell their house with an agent and then rent back with the new buyer putting them on as PM for the old owner as the existing tenant.

that would have to the RE agents DREAM - anything short of that is whinge material.

 

[Propertunity]

.......for an agent to say that to me, means something.

Maybe you should listen to some different agents

From http://www.yipmag.com.au/news/3378/default.aspx

"This 0.25% rate rise was expected. I think we can afford a couple of interest rate rises and the confidence in the economy and the real estate market will override any concerns about where rates are headed Ray White Joint Chairman Brian White.

Jim Midgley, PRDnationwide national director said that recent rate hike will not have a material impact on the property market as investors and homebuyers have already factored it in their finances.

Perhaps the agents you are listening to are just drama queens?

 

[evand]

This scenario is exactly what i was referring to. Agents and anyone with self interest in rising property prices use every minuscule reason to buy and/or spruik ever higher prices.

This time its rising interest rates, give us a break guys. We do have brains you know. You don't buy this hype do you prop?

If rates had fallen they would be saying 'buy now as its cheaper then ever to own a house' but now rates have risen they are saying 'buy now before rates rise further.' It's dead set laughable.

Your Investment property magazine being one of the worse obvious spruikers. the head of a real estate company would have just a little more credibility on this topic.

And maybe the agent isn't a drama queen. Maybe he's being honest because i know him. Anyway, that's what he told me.

 

[willair]

if the rest opf the world pumped their IRs back to 3.25% what would happen?

i think the RBA were good in the 0.25% raise, but any more could signal another strangle.

You only have to look at the numbers-volume in the high end Banks today on the ASX,if a simple 0,25% can push up some over 5% over a 8 hours period,then this is only the start..willair..

 

[Propertunity]

You don't buy this hype do you prop?
And maybe the agent isn't a drama queen. Maybe he's being honest because i know him. Anyway, that's what he told me.

No I don't buy the hype. I though the timing was interesting as I read the YIP mag article almost straight after your post and they were both quoting agents with diametrically opposed views on the market.

I talk to a lot of agents in my line of work and I don't take any notice of any of them......except for a couple of the old heads who have seen a few cycles come and go. A couple that I know are registered valuers too - these guys I listen to and have come to even trust.

They don't think much will happen until we get a 2 - 3% increase.....and even then we are only back to where we were.

 

[Peter 14.7]

So the whole financial crisis lasted a year then...

wow.

Exactly! Peter

 

[evand]

He probably meant the FHB rush of inquiries will fall off a cliff. I didn't clarify. As the popular saying goes. Time will tell....the next few months (and early next year) should be enlightening.

They don't think much will happen until we get a 2 - 3% increase.....and even then we are only back to where we were.

 

[Peter 14.7]

A warning shot I say.

IMO the RBA wants max result for minimal impact. Hence an unexpected rise is to kill off the FHO market. It know needs the media to go crazy. At this stage not much response.

Ross Gittens says rates to top out at 4%

http://www.smh.com.au/multimedia/business/gittins-why-the-rba-lifted-rates/20091006-gksw.html

Peter

 

[Propertunity]

He probably meant the FHB rush of inquiries will fall off a cliff. I didn't clarify. As the popular saying goes. Time will tell....the next few months (and early next year) should be enlightening.

You could be right. Young people seem more media focused than oldies like you & me. That can be a downfall for them because they react more quickly to perceived 'bad' news.

I spent last Saturday at about a dozen Open for Inspections in Newcastle for a client. It was the first week-end after the FHOB was taken down a $3.5K notch. The Opens were still well attended, (except for the overpriced ones) however, it was a long week-end and the weather was wet, windy & cold - so it may not be representative.

As you say, time will tell.

 

[PeterC]

Ross Gittens says rates to top out at 4%

http://www.smh.com.au/multimedia/business/gittins-why-the-rba-lifted-rates/20091006-gksw.html

Peter

top out at 4% 'in the next 6-8 months', which doesnt tell us anything we dont know already. the rates 'top out' for t least a month for a month every month anyway, since the RBA dont normally meet more often than every month!

 

[Peter 14.7]

I think RG is stating top out at 4%, so rise of 1% in total, and then stop, due to the slow recovery.

If so then mortgage rates will be 6.2% after discounts and still awesome cheap IMO.

Peter

 

[steveadl]

ANZ first to announce - 25 points.

 

[vbplease]

I think RG is stating top out at 4%, so rise of 1% in total, and then stop, due to the slow recovery.

If so then mortgage rates will be 6.2% after discounts and still awesome cheap IMO.

Peter

That would be nice.. I was pondering the 5yr fixed rate when it was 6.2% 6months ago.. So if the svr tops out at 6.2% that would be a good savings in hindsight, combined with the flexibility of variable.