How high will interest rates go?
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No one knows.
Just look at it in simple terms,how long is the Rudd government in for take off one year for election mode,so for the next 2 years it's all up, so i think the Sky's the Limit..willair..
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The Lab govt has lots of money in the coffers to spend...AKA surplice from prev magement! So they will put heaps of money into the community, and inflation will go up and the RBA will increase interest rates, in an attempt to control the Labour spend-up.
Well, that's what I think might happen.
Well, that's what I think might happen.
Seems to be in line with what my wife is saying too. She works in a bank selling mortgages. The particular bank she is working in has prepared their models in anticipation of 11-12%.
No offence to your friend....but if 5 year fixed rates are at 8.8%....and basic variable expected to be at 8.53%. It would indicate to me that we are nearing the top of the cycle for interest rates.
Remember...the whole game will change in the next 3-4 months when rates rises over the last 4 months bite hard!
I must admit I am not really affected as I have most of my rates fixed under 7.1%. However, I am raising rents and managing cashflow when these fixed rates come off from mid 2009.
Hopefully this will be synch with rates coming down!
I fixed at 7.78% was that good?
If the market was offering 7.78 for 5 yr rates 6 months ago and 8.8 for fixed rates now, either they were very wrong 6 months ago or are very wrong now. Using market consensus as the basis for investment decisions doesn't seem particularly smart IMHO.
So when you fixed your rates at 7.1%, you thought it was nearing the top of the cycle?
Alex
If the market was offering 7.78 for 5 yr rates 6 months ago and 8.8 for fixed rates now, either they were very wrong 6 months ago or are very wrong now. Using market consensus as the basis for investment decisions doesn't seem particularly smart IMHO.
Agree...even the RBA got it wrong in terms of inflation last year....that is why I rely on what has happened in past cycles. Saw what happened in 1989-1991, 1995-1996, then again in 1999-2001. Best teacher was 1989-1991....the recession we needed to have.
People are happily consuming at the moment......kind of like alcohol.....but at some point they are going to wake up with a hangover. I think this hangover is going to come to fruition over the next 4 months.
Even Economics teams have NFI. The in jokes is that they often just throw a dart on the board before coming out with estimates when fronting the media. The 11/12% is normal stress testing on serviceability calcs. Variable rate around 9% + 2%ish and theres their full doc buffer. Doesn't necessarily mean actual rates will get there. The 3 years bond futures actually rallied 16bps, as high as 25bps shortly after the statement was released. To me thats leaning more on the dovish side.
As I have posted many times before, I believe the political appetite for double-digit home loan rates is non-existant.
Anything more than another 100 bps and standard variable rates will cross that threshold (unless the banks take a hit on their margins).
Publicly, Rudd's threatened to unleash the ACCC on the banks, privately I suspect he's calling the RBA Governor on this topic (or, if he wants to be less political, he's doing it through the Secretary to the Treasury) to get the message across that this mountain had better have a summit sometime soon.
M
Anything more than another 100 bps and standard variable rates will cross that threshold (unless the banks take a hit on their margins).
Publicly, Rudd's threatened to unleash the ACCC on the banks, privately I suspect he's calling the RBA Governor on this topic (or, if he wants to be less political, he's doing it through the Secretary to the Treasury) to get the message across that this mountain had better have a summit sometime soon.
M
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