interest rates at 10% in two years

thats about where i am expecting them to end up, the rba cash rate was 7.25 at its peak in 08, add 2% margin for the banks and you're not far off 10%. Wouldnt surprise me if they got near it again.
 
Oh pleeeeeeeeeease :rolleyes: What a load of media sensationalistic BS.

We know that governments interfere in the property market all the time. If they see the need to, they will do so again.

IRs ebb and flow but overall the long term trend remains pretty much the same.

What a short memory the public have. :rolleyes: All that higher IRs (and higer mortgage payments) lead to, is higher wage claims and then it all becomes more affordable again.....and so the cycle continues......same ole, same ole.;)
 
Oh pleeeeeeeeeease :rolleyes: What a load of media sensationalistic BS.

We know that governments interfere in the property market all the time. If they see the need to, they will do so again.

IRs ebb and flow but overall the long term trend remains pretty much the same.

What a short memory the public have. :rolleyes: All that higher IRs (and higer mortgage payments) lead to, is higher wage claims and then it all becomes more affordable again.....and so the cycle continues......same ole, same ole.;)

mate you are in the wrong industry, you should be selling what stuff you are smoking.
 
this should have a significant effect on the current sharp rise in house prices.

great, we'll be able to buy more for less...;) :D

This would have a devastating effect on FHB but also those already stretched.

Possibly, but for us investors it could present additional opportunities.
I remember the 10% interest rates we had in 2007 and for anyone with large loans it was paiful but we've managed to hold on to our portfolio and added 1 more at the time.
Time works in our favour.
By 2012 our rents & wages would have gone up by 10% or more....
 
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Hi, I'm with Propertunity in this.

Unless rates hit 10% next month, I don't see how it can add much stress.

Don't forget what rates are like in other countries.

In 2 years' time, my LVR goes down 10%

So let's work @ an example. Loan amt 500000 presently 6.5%
In 2 years, loan amt goes down to 400000

Present interest = 32500
@10% = 40000

Rent will have to go up 7500 i.e. 145 per week

Rent isn't likely to increase that much, more like $50 if we're lucky.

So better start looking for ways and means!

KY
 
So let's work @ an example. Loan amt 500000 presently 6.5%
In 2 years, loan amt goes down to 400000

KY, you're saying that you can repay 100,000 of your 500k loan in 2 years, that's 50k a year.

I agree if you can pay off 20% of your loan balance in 2 years, you certainly don't have to worry about 10% rates.

10% rates is a possibility, but the increases likely to be gradual, IF it gets that high at all. If the market is still strong when mortgage rates go past 8%, say, then 10% rates becomes a stronger possibility.

i.e. it's possible, but we're a long away from getting there. I would be shelving it as unlikely and reassess as rates go up further. Though the caveat is that even if rates went to 10% tomorrow, I still have enough buffer to last 10+ years.
 
Hi, I'm with Propertunity in this.

Unless rates hit 10% next month, I don't see how it can add much stress.

Don't forget what rates are like in other countries.

In 2 years' time, my LVR goes down 10%

So let's work @ an example. Loan amt 500000 presently 6.5%
In 2 years, loan amt goes down to 400000

Present interest = 32500
@10% = 40000

Rent will have to go up 7500 i.e. 145 per week

Rent isn't likely to increase that much, more like $50 if we're lucky.

So better start looking for ways and means!

KY

The difference between your post and propertunity's is that you are applied the opening comment (10% interest rates) to your own financial situation.
If you can afford to repay 20% of the loan over two years, then you are actually investing very conservatively.

Propertunity's comment basically said, dont worry about your underlying debt commitment, she'll be right mate, just look to wage increases and the government stepping in to support the market at all costs.
 
If rates hit 10%, they will come back down to 5 as quick as they hit 10%.
Arrears on loans would be at a very high level, retail spending would come to a stand still, small and large business would suffer as a result and gov't stimulus would be required again.

In my simple opinion, I dont beleive rates will be hitting 10
 
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If rates hit 10%, they will come back down to 5 as quick as they hit 10%.
Arrears on loans would be at a very high level, retail spending would come to a stand still, small and large business would suffer as a result and gov't stimulus would be required again.

In my simple opinion, I dont beleive rates will be hitting 10

At current employment rates, yes you're correct. But the assumption is that unemployment is going to be at or below 3% again.

I don't doubt the RBA rate will hit 7.5-8% in the next 2 years and stay that way for at least another 2-3.
 
If you look at things from a lending perspective, a number of the loans that were funded over the last couple of years were assessed at serviceability rates of between 7 and 8.5%. A large portion of 2009 saw an increase of first homebuyer activity. From personal observations, I would expect a great deal of FHB and borrowers in general to come into difficult times if they were forced to pay rates of 10% when coming from average rates of 6% or so. Some may adapt, but a lot wouldn't. The employment rate can be as low as it wants, but if people cant service their loans, I dont think the banks and the economy will be to worried about the employment rate.

A large number of loans were in arrears when we were paying 9% not to long ago. People were at the brink of losing a lot, retail spending had virtually come to a stand still.

The average loan amount is higher now than it was back then, so how the general community could cope with 10% for a couple of years beats me.
 
I think we'll see a slowing down of inflation well before the 10% mark. Every .25% increase after 8% will probably be done with great care, so they don't kill off business and wipe out FHB's.

Personally I don't see rates going higher than our last high.
 
I would think that rates would only hit 10% if house values continue to go gang busters for a few years. This would mean equity to get you through. Then as before I don't think they would stay that high for long. Just have to ride it out ..........if........ It actually happened.
 
Maybe a second-dip recession in the USA will scare the RBA into lowering rates again?

I don't believe the rates will rise to 10%, the rest of the world is being propped by government deficit spending which is replacing real GDP. At some point that stimulus around the world will stop.
 
Maybe a second-dip recession in the USA will scare the RBA into lowering rates again?

I don't believe the rates will rise to 10%, the rest of the world is being propped by government deficit spending which is replacing real GDP. At some point that stimulus around the world will stop.

This is precisely my view.
 
I don't "believe" rates will get over 10% this cycle either. But neither do I think it's impossible. I didn't believe they would be 9.25% or whatever in late 2008. What I've learned is not to back myself nor any other soothsayer on IR "beliefs." Sure, act on your calculated guess - but it's important to have a back-up strategy if you guess wrong.
 
Hi, all this endless speculation is rather wearing but here goes.

It is very Aussiecentric to think that Australia leads the world. We're the Antipodes.

We tend to LAG behind the larger world.

Which country has the highest rates today never mind tomorrow?

Australia put rates up when it was crumbling everywhere else. We're playing catch up. US had higher rates than us then, I think. Look back to the threads in 2008. Specifically April/May

Shutting out all the noise & fireworks, is it not logical to think that Australia HAD to be aligned to the rest of the world?

Ergo, rates had to come down.

My personal view is the pendulum swung too far, not that I didn't enjoy it. It was compensation for the few months that we suffered astronomical rates compared to the rest of the world.

What did YOU do in the last 18 months? Me, I adjusted, Kevin Rudd gave me 18 months to realign my finances. I'm extremely grateful.

Most ordinary people would have been like me.

Now back to the pendulum. Australia is not in bad shape therefore things are normal. 3% base rates are fear driven recessionary rates. We had that only because other countries became basket cases.

Until we become a basket case, our rates have to normalize. 4-5% is quite normal. The base rate in Kuala Lumpur [it was a basket case since 1995] is now at 5.8%

I would look at UK & US before I rush to conclude that our rates will go up to 10%

KY
 
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