How much will rates fall?

[Francesco]

I voted 100bp which includes this recent hike, however I think it could be more if the ecomony looks like going into recession.

As interest rates drop, the thing I will be looking at closely are the long term fixed interest rates. When they look attractive enough I plan to lock in for 5 to 10 years.

I voted 100 bp too and believe this scale of monetary laxity may be possible within a year and the demonstrated cautious approach of the RBA trying to balance with the trade surplus, which is fueling inflation. The significant decline in consumer and business sentiments should mean recessionary conditions ahead to justify continuing lowering of IR. I would be happy to fix at 7-7.5% rate for 2+ years.

What an optimistic change seems to come over everything (except to G&D diehards) since the RBA lowered IR by 25 bp followed by most banks! Good times are around!

 

[Francesco]

I'm starting to understand the general populations dislike of investors, but I would really like to lock in 7% fixed interest rates thanks very much.

Why do they dislike investors when they get a teeny break of lowered IR by 25 bp after bearing the investment risk of successive IR increases over the previous 7 years, including the recent breakneck breakout of 1.5% increases within a year?

 

[Andrew_A]

I'm starting to understand the general populations dislike of investors, but I would really like to lock in 7% fixed interest rates thanks very much.

A few disgruntled non investing; moral philosopher wannabees = the general population? I am yet to encounter a dislike of investors outside of an internet bulletin board.. Has anyone else??

As a subset of the general investing population, and probably the subset being referred to.. property investors were shown just how unwelcome they were the last time -ve gearing was removed, I don't think it would be any different this time around.. Unwelcome until your rent jumps 30% perhaps?

 

[Andrew_A]

In this current down cycle, how much do you think we will see rates fall?

Who knows? It's a tough game predicting these things.

At the moment the decrease to 6.75% is rated 88% on the ASX site, though that can change very quickly. Inflation numbers should be important, falling commodities should help that.

I will be much more open to the idea of a long term fix of rates next time the inflation genie makes an appearance.

 

[sailor]

I voted 100, just because I'm in a conservative frame of mind at present.

 

[evand]

For one, how do you know its a "down cycle"?

I voted 50 basis ponts as the RB has a sharp eye on inflation which still has upward pressure rather then down. At the first sign of uncomfortably increasing inflation, they will put on a interest rate rise or two.

And with this commodities boom continuing, they know theer always a risk of inflation getting out of hand.

Anything over 100bp is dreaming.

 

[MichaelW]

Anything over 100bp is dreaming.

Hi Evan,

I won a beer off BoomTown by stating early I thought we'd have a rate cut by Christmas when most of the other forumites were still in "inflation" and "rate hike" land.

Fancy putting a beer on that bet too? I'll wager at least 100bp down (which includes the one just received) before we bottom and turn up.

Beer bet? Go on, tell him he's dreamin'

Cheers,
Michael

 

[Shadow]

I remember back in Q1 this year, the D&Gers kept telling me there was no way rates would fall this year, or even next year. Rates would keep rising all the way through this year and next. We would see high double digit rates. The RBA would keep pumping rates to the moon and force the specufestors to dump all their properties and flood/crash the market.

Then in late Q2 they moderated their assertions and said rates will go up another few times and then hold. But definitely no rate cuts. And as Q2 rolled on they changed this to rates are already on hold, but there is no way we will see any cuts.

Then in July they said that the RBA might cut rates once and once only, but the banks would take no notice. The banks would raise rates, even as the RBA cut rates.

Then in August they said that the RBA might cut rates, but the banks won't pass it on... the banks will hold.

Then in September they said the banks will only pass on the first RBA rate cut, and that the RBA probably won't cut again, but even if they do, the banks won't pass it on...

And so it continues...

I think the RBA will cut by a further 200+ basis points over the next two years, and that the banks will pass on around 150+ basis points.

Shadow.

 

[MichaelW]

I think the RBA will cut by a further 200+ basis points over the next two years, and that the banks will pass on around 150+ basis points.

Stop it! I'm trying to entice Evan into a beer bet!!

Cheers,
Michael

 

[evand]

You're on but we'll make it a nice bottle of scotch if you like.

Hi Evan,

I won a beer off BoomTown by stating early I thought we'd have a rate cut by Christmas when most of the other forumites were still in "inflation" and "rate hike" land.

Fancy putting a beer on that bet too? I'll wager at least 100bp down (which includes the one just received) before we bottom and turn up.

Beer bet? Go on, tell him he's dreamin'

Cheers,
Michael

 

[MichaelW]

You're on but we'll make it a nice bottle of scotch if you like.

Definately! I'm a fan of a good single malt.

I got my beer off Boomie in a couple of months. We might have to wait a bit longer to see how this bet pans out. But then again, a single inflation spike could see you collect early before my ease trend reasserts itself...



Michael

 

[lizzie]

i voted 200pts - and not only because it "would be nice" - the rba has a tendancy to overswing the pendulam with increasing and decreasing rates so, even tho 150-175pts would be all that is required to settle the economy, i believe they will go that inch to far.

and then we all pounce and lock in for as long as possible!

 

[Peter 14.7]

I remember back in Q1 this year, the D&Gers kept telling me there was no way rates would fall this year, or even next year. Rates would keep rising all the way through this year and next. We would see high double digit rates. The RBA would keep pumping rates to the moon and force the specufestors to dump all their properties and flood/crash the market.

Then in late Q2 they moderated their assertions and said rates will go up another few times and then hold. But definitely no rate cuts. And as Q2 rolled on they changed this to rates are already on hold, but there is no way we will see any cuts.

Then in July they said that the RBA might cut rates once and once only, but the banks would take no notice. The banks would raise rates, even as the RBA cut rates.

Then in August they said that the RBA might cut rates, but the banks won't pass it on... the banks will hold.

Then in September they said the banks will only pass on the first RBA rate cut, and that the RBA probably won't cut again, but even if they do, the banks won't pass it on...

And so it continues...

I think the RBA will cut by a further 200+ basis points over the next two years, and that the banks will pass on around 150+ basis points.

Shadow.

I love your posts Shadow.

Personally I dont understand these doom and gloomers? I mean, if they are right , i.e. Massive Crash imminent then why promote it?!? Why not let us all invest foolishly and then the crash is bigger and they get in at a lower level say -30% or -50%.

I can understand talking up a boom that is not there if your looking to offload but what is the advantage to talking up a downturn? Knowledge kills it as people become cautious?!?! It is like telling everyone at the racetrack an outsider horse is a sure bet. Everyone gets on it and you win back you bet plus a bit, instead of a lot?!?!

What the D&G seem to fail to understand is IP investment is lonnnnnng term. At least 3 and more likely 5, if not forever years. As such fix your rates and prices/ movements of the future don't matter.

You dont get margin called on houses. When times are tough, People dont move out from residential like busineses do from commercial.

There is no silver bullet to reducing housing costs that will undercut the market like say Chinese Cars will do to car value or new Gen Computers will do to software.

Decentralise is the only hope and that has been tried and tried so many times and failed because people dont want to move.

Very fast train? yeah, give it 10 years to get up (if at all) and then like toll roads the numbers are not there to make a buck. Even when cheap, people dont use it: i.e. My mum can get a train from a station, 300m from her home, to my town in 40min. then 1km walk to us. As a pensioner it costs $1.45 one way. In petrol it costs her at least 5 litres so $7. She almost always drives.

There is no reason in this country for prices to crash.

Regards Peter 14.7

 

[evand]

ok, sounds good. as always time will tell.

this one looks nice

http://www.singlemalt.com.au/store/product_info.php?cPath=22&products_id=60

Definately! I'm a fan of a good single malt.

I got my beer off Boomie in a couple of months. We might have to wait a bit longer to see how this bet pans out. But then again, a single inflation spike could see you collect early before my ease trend reasserts itself...



Michael

 

[willair]

In this current down cycle, how much do you think we will see rates fall?

I voted another 25 pts,and in line with balance and with a open mind and as most smart people that i know outside this site each morning tell me at 5 past 9 each morning,the high end risk takers that use their own funds bet heavily when the market offers them opportunity,when the odds are in line with they way they think,any other time the just sit on the sidelines
and wait,some wait weeks months, how many investors have been sitting on the sidelines for the past 3=5 years in property?, i don't care less which way the market goes i have had the same strategy for a long time
and if you change as the evidence changes and be prepared for "FAILURE" as most that i know look at first then work up from there to success the rates may well fall more but it will not worry me 1%..IMHO..
willair..

 

[boomtown]

Definately! I'm a fan of a good single malt.

I got my beer off Boomie in a couple of months. We might have to wait a bit longer to see how this bet pans out. But then again, a single inflation spike could see you collect early before my ease trend reasserts itself...



Michael

Yes but those greedy banks haven't promised to pass on the whole bottle of scotch, Im sure they will take a big swig out of the top first.

 

[hobo-jo]

I can understand talking up a boom that is not there if your looking to offload but what is the advantage to talking up a downturn? Knowledge kills it as people become cautious?!?! It is like telling everyone at the racetrack an outsider horse is a sure bet. Everyone gets on it and you win back you bet plus a bit, instead of a lot?!?!

Maybe they think it will strike fear in those that don't know any better (and/or haven't done due diligence on their purchased properties) and cause panic selling...

I think like everyone though its just that they want their opinion to be seen for discussion sake.

 

[MarkB]

An interesting poll but completely useless since no-one can:

• accurately envisage short-medium term inflationary factors
• the actions of many of the world's central banks in response to these as yet unknown short-medium term inflationary factors
• the impacts on world financial markets and economies as a result of the actions of the world's central banks in response to the as yet unknown short-medium term inflationary factors
• the effects on the australian economy arising from the impacts on world financial markets and economies as a result of the actions of the world's central banks in response to the as yet unknown short-medium term inflationary factors
• the reserve bank of australia's response to the the effects on the australian economy arising from the impacts on world financial markets and economies as a result of the actions of the world's central banks in response to the as yet unknown short-medium term inflationary factors

Does anyone here think they have the perfect crystal ball?

As I said, interesting, but completely useless.

 

[buzzlightyear]

An interesting poll but completely useless since no-one can:

• accurately envisage short-medium term inflationary factors
• the actions of many of the world's central banks in response to these as yet unknown short-medium term inflationary factors
• the impacts on world financial markets and economies as a result of the actions of the world's central banks in response to the as yet unknown short-medium term inflationary factors
• the effects on the australian economy arising from the impacts on world financial markets and economies as a result of the actions of the world's central banks in response to the as yet unknown short-medium term inflationary factors
• the reserve bank of australia's response to the the effects on the australian economy arising from the impacts on world financial markets and economies as a result of the actions of the world's central banks in response to the as yet unknown short-medium term inflationary factors

Does anyone here think they have the perfect crystal ball?

As I said, interesting, but completely useless.

Unfazed, if we were to take that view, 75% of this forum's content would be deemed as useless.

 

[MarkB]

There's a world of difference between asking for advice when a tenant doesn't pay the rent and the question being posed in this thread.

Medium term economic forecasting is notoriously inaccurate - even for the best trained economists - which is why so few engage in it.

If you think you have the answer, then I say all power to you.

I think you're kidding yourselves, but don't let that stop you all from your postulations.