KY, US Fed rates have practically been zero for a number of years now. Are you comparing the US mortgage rate (which is based on the 30 year rate) and the Australian RBA rate (overnight)? You can't possibly compare the two directly, since you're ignoring the whole of the yield curve.
interest rates at 10% in two years
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KY, US Fed rates have practically been zero for a number of years now. Are you comparing the US mortgage rate (which is based on the 30 year rate) and the Australian RBA rate (overnight)? You can't possibly compare the two directly, since you're ignoring the whole of the yield curve.
Hi Alex,
Which is why i can't see RBA going up to 10% in the next heartbeat. Unless something drastic happens to US & UK [from 0.5% there's a long waY to go]
Like Ausprop, I have a loan @ 10.5% I thought [foolishly perhaps] that I could do better & make some profit. 1st year OK, 2nd year looking more dicey. But hey, AllOrds passed 5000 today.
And folks, guess what? I went looking again yesterday & there's no let up in Adelaide.
Au contraire, there's a fair amount of investor interest. I've noted a few properties of the crap variety that make sense to buy!
And a couple in the 400K that even look as if there's cap gain in them.
Interesting, to say the least. Now, who has the guts to borrow?
KY
Which is why i can't see RBA going up to 10% in the next heartbeat. Unless something drastic happens to US & UK [from 0.5% there's a long waY to go]
Like Ausprop, I have a loan @ 10.5% I thought [foolishly perhaps] that I could do better & make some profit. 1st year OK, 2nd year looking more dicey. But hey, AllOrds passed 5000 today.
And folks, guess what? I went looking again yesterday & there's no let up in Adelaide.
Au contraire, there's a fair amount of investor interest. I've noted a few properties of the crap variety that make sense to buy!
And a couple in the 400K that even look as if there's cap gain in them.
Interesting, to say the least. Now, who has the guts to borrow?
KY
I would be if I wasn't on lowdoc KY!
But KY, as for the 10% rates, remember they're not talking a 10% RBA cash rate, they're talking about 10% rates for borrowers in reality after the banks margins. Bit of a difference.
And inflation will kick in as a result of all that money printing, pushing interest rates up all over the world. The higher interest rates are worldwide, the more expensive money becomes for local banks in Australia. Not only will you have to deal with higher interest payments, you have to deal with tighter lending standards too.
10% on a 100k loan is serviceable. 10% on a 350k loan is a different kettle of fish. If affordability is a problem many people already have, what do you think 10% interest rates are going to do?
Here, look at the impact rising interest rates had on the FHB's, and this was back in January already!
http://www.couriermail.com.au/news/...erest-rates-rise/story-e6freoof-1225825030812
As for wages going up to cover those rising interest rates? Nothing drives inflation like wages. And nothing drives interest rates like inflation. Rapidly rising wages means higher interest rates.
While there is no certainty that we would see double digit interest rates, thinking Australia exists in some economic vacuum is a tad naieve on some peoples part
Hi Alex, I got it wrong. But the differential between AUD/USD was never very wide, until the GFC.
The last time our rates were lower than US would have been around 2001-2003?
KY
The last time our rates were lower than US would have been around 2001-2003?
KY
Hi Steve & Deano, I understand.
The basic home loan rate is still only around 6. something - mine's 6.23 at the moment. There's another 4% to go. We're talking about a DOUBLING of interest rates at base.
And precisely Deano, Australia doesn't exist in a vacuum.
If other countries don't double the borrowing rates, why would Australia do so?
The 10% rates are for business loans, it happens to be a private loan.
KY
The basic home loan rate is still only around 6. something - mine's 6.23 at the moment. There's another 4% to go. We're talking about a DOUBLING of interest rates at base.
And precisely Deano, Australia doesn't exist in a vacuum.
If other countries don't double the borrowing rates, why would Australia do so?
The 10% rates are for business loans, it happens to be a private loan.
KY
WHats to say they are not going to? It would be the CASH RATE. Already our rates are higher than most developed countries. Our interest rates are not tied to foreign interest rates. They are tied to the performance of our local economy!
Government spending around the world has been nothing short of massive. The amount of money thrown into stimulus alone means that the printers are running hot. Plus you have all the problems with the Euro and Greece, Portugal, Spain, Ireland, Iceland and now Latvia. Even Dubai was in trouble. There are more bailouts coming.
First we had private debt explode. And that has not settled yet by any means when you look at how many people are still defaulting in the USA. Commercial property is the next big wave to hit their banks.
Now we have a huge problem with SOVEREIGN DEBT. When governments dont have money, its up to the tax payers to sort things out. Not only that, but they have to increase interest rates to reduce inflation. Inflation it has created by flooding the world markets and banks with money.
Interest rates have very little to do with housing. People obsessed with housing will see interest rates as a something aimed specifically at that. At the end of the day, interest rates are used to control MONEY SUPPLY and in effect INFLATION. Housing is just caught in the tidal wave.
Interest rates are going to go up all over the world simply because of the amount of money that is being circulated now. So you will higher taxes, higher interest rates and reduced buying power for a while. The GFC was the start of something bigger, it was never the main event.
The 10 year fixed rate at CBA is ~8.5%
Would only take 1.5% rise to get it to 10% - if the rba raised .25% at every second meeting we'd still be there in about a year.
Now realistically who pays the 10 year fixed rate? But why let details like that get in the way of a good headline
Yes. Especially if its fixed
Hehe, I realise there is not a one-to-one correspondence between changes in the short term rate and longer term rates. It was just an (admittedly contrived) example because in discussions about interest rates you can't assume everyone is paying variable with a discount. Did not mean to create confusion.
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When debt problems become a real problem, whats the easiest way to fix them????
default.
now there is default by bankrupcy, and there is another way: default by stealth.
how do you default by stealth: you let inflation eat away at the debts.
http://www.cnbc.com/id/36410279
i highlight the following comment:
In the interview, Strauss-Kahn also addressed how the wider euro zone could retain social security programmes while handling expanded state debt, suggesting pension benefits must be trimmed and higher inflation targets may be an option.
Ha? but i thought there was minimal inflation????? well maybe we had better create some then!!!!!
this is not a new game strategy for the world, we have been down this exact past before, its just the current generation werent around to see it.
Life and asset classes move in cycles
