There's a news article everyday warning of a double dip recession. Was there this much anticipation right before the first Global Financial Crises hit or are people being negative...
I doubt rents will drop. If rates hit 10%, landlords would pass on what they can onto their tenants. More FHB will be priced out of the market with the banks getting tighter on credit, putting more pressure on rents.
I dont think rates will reach 10% while we still have problems in the US and Europe. But when I recently got my loan I made sure I could pay 10% as a buffer.
But it seems like the rising rates may not deter buyers:
http://www.smh.com.au/business/home-loans-on-the-rise-20100712-106hy.html
When the US and UK were cutting rates just before the GFC hit, the RBA were raising them. Then they cut the rate quickly. It's possible they've got it wrong again.
graphs are good :D