Interest Rate at Peak - what do you think?

[TheAnalyst]

I read few articles that Amberica has reduced interest rates few times this year and now is the lowest since a year ago.

I reckon interest rate in Australia is at peak --- 8% (variable rate). What do you think?

 

[Rolf Latham]

I dunno who pays 8 % ?
ta
rolf

 

[TheAnalyst]

8% has been quoted on the media as standard variable rate. As far people not paying that, that is another matter.

 

[Jamie]

I read few articles that Amberica has reduced interest rates few times this year and now is the lowest since a year ago.

I reckon interest rate in Australia is at peak --- 8% (variable rate). What do you think?

When did the US Federal Reserve cut rates? The last 17 movements in the US have been UP.

Jamie.

 

[alexlee]

Don't know what articles you've been reading, Analyst. I don't see a fall on this curve since 2004. From www.cnnfn.com.

As for interest rates peaking at 8% variable because the media says it's 8% even though people are actually paying 7%.... does that mean the RBA should jack interest rates up if the media says inflation is 5% when in reality it's 3%? Why should we believe the media figures, especially when we know (surely you're not paying 8%, Analyst) that it's wrong?
Alex

 

[wanelad]

I read few articles that Amberica has reduced interest rates few times this year and now is the lowest since a year ago.

I reckon interest rate in Australia is at peak --- 8% (variable rate). What do you think?

Yes the SVR is 8% but if you are paying that feel free to contact me and will set you up with a great deal no charge for my service

 

[JIT]

No charge, really...hmmm? None of the brokers I know charge clients directly?

GSJ

 

[scouse]

steve mcknight's latest seminar video states his prediction of more interest rates rises to 9% allowing for the impact of the drought to take hold.

 

[toony]

i just fixed for 5 yrs

i just fixed a loan for 5 yrs at 6.99% I still reckon there will be a hiatus before more rises. I doubt they will decrease rates before they go up.

Fundamentally we are have a very low unemployment rate. Thats got to be a worry for the RBA. So why would they decrease interest rates.

Sure we have a drought but we also have a mining sector in WA going ballistic - so they sort of balance out.

 

[geoffw]

Sure we have a drought but we also have a mining sector in WA going ballistic - so they sort of balance out.

The drought is goingto have a huge influence on prices. WA mining will balance at least some of the negative growth caused by the drought- but drought led inflation will perhaps be giving the RBA concern.

I heard that Australia's wheat production is down 85% this year.

 

[willy1111]

I remember BIS shrapnel predicting interest rates would hit 9-10% by 2009/2010 - that prediction was about 1 or 2 years ago. Could turn out to be fairly accurate - who knows.

Peter Spann talks about 3 cycles - shares, property and interest rates. We are definetly not in the property cycle (eastern states) and the share cycle has been going for almost 4 years now - given that you would think we would have to be moving into the interest rate cycle (rising .75% in one year) soonish (or it may have already began).

Couldn't see them going past 10% though.

The SVR was at 8.07% (where it is now) from Aug 2000 to Feb 2001 before going down to 6.07% in December 2001 - and then has obviously climbed back up to 8.07% in November 2006.

 

[TheAnalyst]

It seems we live in two countries - One in WA and one in the east.

Today I asked a guy doing lawn mowing in front of my house whether he could do mine (2 houses). He rejected - he could not cope with the load - he has average 20 a day and do not want to take on more work. Seem like Jim's mowing. ------ What this story tell me is the employment and booming economy.

However in the east, we really see it is going into the recession. I do not know whether the RBA would put more salt on the wound.

What the drought would have to raise the rate? I have no idea. It only says the agriculture might have problem but it certainly would be offset by others.

The ex-goveror said the 17% in the labor goverment had to be. I just joked with this fellow guy who managed the RBA for many years. He did not blame himself and the poor management of the government. As an investor, I have dealt with so many trades person, but nobody blame themselves for the bad job they have done.

 

[Jase H]

This talk of the East Coast going into a recession is very generalised an downright incorrect and misleading.

When people talk of the East Coast I presume they are not just talking about Sydney but of the whole Eastern Seaboard. If that is the case then where I live Canberra would be included in this so called East Coast Recession. Yeah right! We have the lowest unemployment of any state or territory in oz and also the highest median incomes. Also, the downside to such a labour shortage is we have a CPI figure of almost 5%! Hardly, underlying conditions which would be discribed as leading to a recession.


Jase

 

[alexlee]

However in the east, we really see it is going into the recession. I do not know whether the RBA would put more salt on the wound.

For years the RBA was blamed as being too East-centric. i.e. helping the Eastern states and ignoring the West. Now it's the reverse, and the RBA is still getting blamed.

The ex-goveror said the 17% in the labor goverment had to be. I just joked with this fellow guy who managed the RBA for many years. He did not blame himself and the poor management of the government. As an investor, I have dealt with so many trades person, but nobody blame themselves for the bad job they have done.

In hindsight, those high interest rates broke the back of inflation and arguably laid the foundations for the 90's boom. Could it have been handled better? Probably, there is always room for improvement. Is economic pain a prerequisite (and result) of boom times? Probably, as shown in the existence of cycles. I would argue the RBA hasn't done a bad job. Can't really argue with a tradie who starts by blowing up your house and messing things up if they end up building something better. All of this is in hindsight, of course. If you want to blame the RBA for the recession of the early 90's you also have to give them credit for the subsequent 15 years of growth and low inflation.

Given how much money you said you've made in this boom, Analyst, why the heck are you biting the hand that feeds you? This last business and interest rate cycle is what helped the boom that has made money for us! The RBA has had massive influence over this. Their purpose may not have been to inflate the housing market, but that's what it's resulted in and I certainly have nothing but good thoughts for McFarlane.

Have you consulted those articles that said the US Fed has been dropping rates lately, BTW?
Alex

 

[TheAnalyst]

Alexlee,

Thanks for your comments. I just argued the ex-governor's comments. Why the 17% had to be?

China has been growing at 9% a year over the last 20 years. I guess it is going to be another at least 10-20 years. Why? Why they do not have to go to recession? why can they have the low rate? who said the governmetn can not manage the rate? The RBA can not do anything reverse. I did make another thread -- highest paid easiest job. Whether the rate is up or down? people already know (based on the inflation data) before these fat paid people sitting around the table and had a meeting, then put on their website on the following day.

I believe current RBA should be cut to 1/3 of its current level --- a waste of tax payer's money. I used to work in a government department. They got more people than they need but they still say they do not have enough --- because a manager wants several sections, then section manger wants more people.... they do not want to be looked they are small branch. That was why I left the government department. A lot of employees basically do nothing everyday but on the internet, meetings.... I believe the RBA is the same.

I have not found the origional article yet (I read from the internet).

 

[Jamie]

I read few articles that Amberica has reduced interest rates few times this year and now is the lowest since a year ago.

You still haven't answered my previous questions...

When did the US Fed reduce interest rates in Amberica??

You're obviously a man of science (given your name) - can you link the articles that said that interest rates had fallen in the US?

Im struggling to understand the notion of a stagnant US interest rate when you have told me otherwise - do I listen to you, or the economic data at hand?

The Analyst says interest rates have fallen over the last year... The real world tells us that the last 17 interest rate movements in the US have been UP.

The Analyst - What exactly are you analysing?

Jamie

 

[BAdams]

US Interest Rates

You still haven't answered my previous questions...

When did the US Fed reduce interest rates in Amberica??

You're obviously a man of science (given your name) - can you link the articles that said that interest rates had fallen in the US?

Im struggling to understand the notion of a stagnant US interest rate when you have told me otherwise - do I listen to you, or the economic data at hand?

The Analyst says interest rates have fallen over the last year... The real world tells us that the last 17 interest rate movements in the US have been UP.

The Analyst - What exactly are you analysing?

Jamie

Interest rates have gone down in the US over the past year. In fact, we just refinanced to a 5.75% fixed for 5 years (Interest Only Jumbo Loan). Unfortunatly the only want to take equity out of your property is a home equity loan (PPOR) which is usually a 7.5% rate or to completely refinance.

The current 30 fixed is around 6.25% for a Standard Loan.

Although they are somewhat linked to the Fed Reserve Rate, there are other factors such as the competition among many many banks. You can check out www.bankrate.com to see the average rates move up and down every week.

Rates were very low through 2003-2005 and then they spiked in mid 2005 for about 6 months. Now they are back to what we consider a slightly below average rate.

 

[fernfurn]

ANZ are offering fixed rates at 7.55% for long term. I cant see them not knowing what they are doing and ending up 1.45% under on every loan for years (if rates go up to 9% as McKnight says)

 

[alexlee]

ANZ are offering fixed rates at 7.55% for long term. I cant see them not knowing what they are doing and ending up 1.45% under on every loan for years (if rates go up to 9% as McKnight says)

Fixed loans are different. If it's say 10 year fixed at 7.55%, ANZ would just sell the loans as 10 year fixed rate bonds at say 7.3% and make a guaranteed 0.25% spread. Variable rates track the RBA official rate. Fixed rates depends on the market's view of future interest rates. In the example above, even if the official rate went to 20% ANZ would still be making the same spread, assuming they sold (securitised) all their loans.

Prior to this set of rate rises some fixed rates were BELOW the variable (suggesting the market thought rates would fall). Banks aren't losing any money as a result. The bond buyers who bought those fixed rate bonds are underwater, though, but that's their problem.

The current fixed rate suggests that the market thinks rates aren't going to rise in the long term, but that doesn't mean rates won't rise in the short term.
Alex

 

[TheAnalyst]

Jamie, BAdams has told you part of the thing I was talking about. I have not found the article and when I found I will advise you. It was not my makeup.