How much will rates fall?

[Alex P Keaton]

I'm not sure whether to get a fixed or variable when I buy my ip shortly.

What are you guys gonna do??

But the cut has also presented house-hunters -- and those looking to re-mortgage -- with a bit of a quandary. Should they stick with their variable-rate loan, or take some of the cheaper fixed-rate deals now on the market?


The typical bank variable rate will now be around 8.36 per cent, compared to the best fixed deals, which start from around 7.99 per cent -- an immediate saving for those who fix.

But economists say that the cash rate may well fall by as much as 1.5 per cent during the next year or two -- and that means variable mortgage rates could fall to around 7.11 per cent.

That lower rate, however, assumes that the banks will pass on all of the cash rate cuts -- and that is unlikely.

 

[BV]

I'm not sure whether to get a fixed or variable when I buy my ip shortly.

What are you guys gonna do??

A 12 month honeymoon rate is the best option if you can get it

Cheers

 

[sash]

I think it will be a slow crawl to for the interest rates to get down to aobut 6.8%....perhaps in late 2010 - early 2011 from 9.6% in Aug. 2008.

As for whether to get fixed rates now....I would stick to variable for now. You can get about 0.7% off the standard variable rate so you should get a variable rate of 8.6% comfortable at the moment.

The one year rates are still high at the moment till we have another couple of rate drops. Perhaps Oct., Nov..

I'm not sure whether to get a fixed or variable when I buy my ip shortly.

What are you guys gonna do??

 

[MichaelW]

Hi Evan,

Just wondering whether I can collect on that bet below now?

I've stated openly here I reckon the RBA will cut 200bp or more before this easing cycle is over, and so far its now 125bp. Even I didn't spot it happening quite that fast, but the trend is still to ease IMHO.

That's two from two on the bet count now. BoomTown didn't think the RBA would ease 25bp by Christmas and they went in August. You didn't think they'd ease 100bp or more this cycle and they did that in one hit! Ah well, its not the only bet of mine that's paying off nicely at present... my 1kg of gold hedge is paying off nicely too. Up to $43K AUD at last check. About double what I paid for it 12 months back.

Cheers,
Michael

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

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

 

[topcropper]

my 1kg of gold hedge is paying off nicely too. Up to $43K AUD at last check. About double what I paid for it 12 months back.

Cheers,
Michael

Crikey.!! Well done. Had no idea gold was up that much in A$.

See ya's.

 

[MichaelW]

Hi Guys,

An interesting read by Dr Shane Oliver at AMP today:

http://library.corporate-ir.net/library/21/219/219073/items/313116/interest.pdf

Basically, he is predicting the RBA is on a major easing trend and won't stop until rates are at 3.75% or lower. That would be a 3.25% (325bp) ease from the top of the cycle at 7.00%. He also reckons its not going to be the slow process some here are still suggesting.

This time around the economic threat is greater and given the blow out in mortgage rates versus the cash rate it may be necessary to ultimately cut the cash rate to a lower level (say to 3.75%) by the end of next year. Another factor pointing to a sharp further reduction in Australian interest rates over the next 6-12 months is that the household sector is more vulnerable today with much higher debt. The likelihood is that rising unemployment will trigger a desire to reduce debt and hence spending. Much lower mortgage rates will be necessary to make sure this does not turn into a downwards spiral

Of course, there is the usual caveats around rising unemployment and price pressure on assets, but we're all aware of that.

The crux of this all is, if you can hold onto your job then you'll do very well out of the next few years.

Cheers,
Michael

 

[Peter 14.7]

Thanks Michael

On job losses, I think a good thread would be "report real job losses" thread.

I suggest this as whilst there is a lot of talk of job losses, I personally don't know/see too many (yet) that are a direct result of the recession/downturn .

Kyneton Holden closed down after 50 years but that is more the price of fuel killing big engine Holden sales and the fact you can drive 1hr to bendigo or Melb CBD to get bulk sale deals than the meltdown?

Anyone seeing real layoffs? I would assume Salespeople are the first area to be hit.

Peter

 

[Peter 14.7]

PS Personally I think you will score a few bottles of that Scotch! Pro rata...

Peter

 

[sash]

Take2!.......I am changing my mind.....I think we will see 6% rates by April 2009 at the rate thngs are going!

Cheers
Sash

I think it will be a slow crawl to for the interest rates to get down to aobut 6.8%....perhaps in late 2010 - early 2011 from 9.6% in Aug. 2008.

As for whether to get fixed rates now....I would stick to variable for now. You can get about 0.7% off the standard variable rate so you should get a variable rate of 8.6% comfortable at the moment.

The one year rates are still high at the moment till we have another couple of rate drops. Perhaps Oct., Nov..

 

[kum yin lau]

Hi, how hard do you want me to clap? I'll do my best to comply!

Every % drop means a fair amount of money to me. Plus, I did an irritating thing to the bank - transferred $ from offset to FD when they offered 8.5%
Neat little trick. My home loan rate is now lower than my FD rate.

But they got the last laugh. They put the fee $20.

It should be illegal!

KY

 

[MichaelW]

OK,

The RBA cut rates again today by an addional 75 bp!

Here we go:

http://www.rba.gov.au/MediaReleases/2008/mr_08_25.html

More than predicted by most. That takes the overall cuts so far in this easing cycle to 200bp with more to follow. (Well at least a few of us predicted at least 200bp

Great news for property.

Cheers,
Michael

 

[Aaron Sice]

god i wish they'd stop f__ing things up with my house and just finish the damn thing.

 

[Peter 14.7]

If you have the chance, re-read this thread.

Literally two months back most of us were saying 200 points by April 09 and some not even that. Experts quoting 150, etc..

Only 60 days later and as of today, we are at 200 points and going down!

We live in interesting times....Peter

 

[yadreamin]

IF ...... only the banks/lenders will pass these cuts on
They were all so damn quick to put them up and some more than the RBA.
How or what can we do to see the rate cuts passed onto to us?

cheers
yadreamin

 

[djsherly]

Great news for property.

Cheers,
Michael

cetirus paribus, yes, but the world is a zoo right night so it needs to be taken in context.

 

[landlubber]

If you have the chance, re-read this thread.
....Peter

Yes..Isn't it amazing what a difference 60 days make. But the "guffaw of the century" has to go to the RBA and it's esteemed board of stuffed shirts who were persistently raising rates just a few months ago and are now dropping them as fast as they can. Just proves they can't forecast more than "three steps ahead". Hopeless. What a total joke this system is. You only have to roam around You-tube and there were videos back to 2007 that "flew the danger" flags loud and clear. ...and there's still the tiny matter of $13 trillion (that's trillion) exposure that our safe, tax payer guaranteed Aussie banks have to the toxic derivatives.
LL

 

[landlubber]

Aussie banks $13 trillion exposure.

http://business.theage.com.au/busin...f-offbalancesheet-exposure-20081103-5h10.html

A good article. Remember this is ina country where $20 billion is a HUGE surplus.
LL