Interest rates increase

At its meeting today, the Board decided to raise the cash rate by 25 basis points to 4.0 per cent, effective 3 March 2010.

The global economy is growing, and world GDP is expected to rise at close to trend pace in 2010 and 2011. The expansion is still hesitant in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity. In Asia, where financial sectors are not impaired, growth has continued to be quite strong. The authorities in some countries are now seeking to reduce the degree of stimulus to their economies.

Global financial markets are functioning much better than they were a year ago and the extraordinary support from governments and central banks is gradually being wound back. Credit conditions remain difficult in some major countries as banks continue to face loan losses associated with the period of economic weakness. Concerns regarding some sovereigns remain elevated.

In Australia, economic conditions in 2009 were stronger than expected, after a mild downturn a year ago. The rate of unemployment appears to have peaked at a much lower level than earlier expected. Labour market data and a range of business surveys suggest growth in the economy may have already been at or close to trend for a few months. There are some signs that the process of business sector de-leveraging is moderating, with the pace of decline in business credit lessening and indications that lenders are starting to become more willing to lend to some borrowers. Investment in the resources sector is very strong. Credit for housing has been expanding at a solid pace, and dwelling prices have risen significantly over the past year. New loan approvals for housing have moderated a little over recent months, however, as interest rates have risen and the impact of large grants to first-home buyers has tailed off.

Inflation has, as expected, declined in underlying terms from its peak in 2008, helped by the fall in commodity prices at the end of 2008, a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand. CPI inflation has risen somewhat recently as temporary factors that had been holding it to unusually low rates are now abating. Inflation is expected to be consistent with the target in 2010.

With the risk of serious economic contraction in Australia having passed, the Board moved late last year to lessen the degree of monetary stimulus that had been put in place when the outlook appeared to be much weaker. Lenders generally raised rates a little more than the cash rate and most loan rates rose by close to a percentage point.

Interest rates to most borrowers nonetheless remain lower than average. The Board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today’s decision is a further step in that process.
 
Not for me. My wonderful broker managed to squeeze ANZ for an additional 0.2% discount today morning (loaded into system @ 11:30am). So this rate rise is almost neutral for my cashflow (0.05% diff .... but marginal once -ve gearing applied).

This is offcourse assuming ANZ don't raise beyond the RBA rise
 
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riiiiiiiiight........

small - medium business just getting back on track over Christmas and "thanks for that - more money please".....?

the wealth confiscation vehicle is at work.
 
Not for me. My wonderful broker managed to squeeze ANZ for an additional 0.2% discount today morning (loaded into system @ 11:30am). So this rate rise is almost neutral for my cashflow (0.05% diff .... but marginal once -ve gearing applied).

This is offcourse assuming ANZ don't raise beyond the RBA rise

tdh78au, what is your total discount now, and against what borrowings?
 
Last years FHB bubble buyers already under pressure with a reported 50% under mortgage stress, I'm sure this isn't going to help. Rents up? Maybe. Prices dropping? I suspect very soon.
 
Not sure why people think you can increase rents immediately just because interest rates have gone up?!

I feel that rents are determined largely by local supply/demand factors.
 
Works out at an extra $20ish for us, and $5ish of that is for the rented property. So I don't think we are suddenly going to rush out and increase their rent.
 
Works out at an extra $20ish for us, and $5ish of that is for the rented property. So I don't think we are suddenly going to rush out and increase their rent.

Mine is fixed for the next 4.5 years at 5.19% so neither will I. :D

Although the PPOR is variable, which isn't deductible. :mad:
 
Not sure why people think you can increase rents immediately just because interest rates have gone up?!
I feel that rents are determined largely by local supply/demand factors.

As a LL I feel I am not the one going to pay. It is user-pays here! The media has already softened tenants up for increases - so here it comes.

As for supply and demand - yes you are right. But in my neck of the woods vacancy rates are below 1%. Plenty of demand - so I get to call the shots on the price of supply.

We are runnig a business, not a charity. ;)
 
Not sure why people think you can increase rents immediately just because interest rates have gone up?!

I feel that rents are determined largely by local supply/demand factors.

I would add that I thought the answer about increasing the rents was a little tongue in cheek. We all know that we cannot just "up the rent" as there are leases in place and notice periods.

However, when the leases finish it is a different matter, and if rate rises mean that rents rise generally, then of course the new lease will more than likely be at an increased rent.
 
sure you can all automatically put up rents (subject to leases) but that doesnt mean all tenants will agree with it or put up with paying more. i know in my area rents have come down marginally in the last month compared to jan (or that may just be lower quality places, hasnt been enough quantity to be able to put a finger on it for sure). but we know anyone whos good at what they do will make sure the time is right for a rent rise and not just do it automatically

guess some landlords like rates going up and down often, allows them to have a 'reason' for rent rises when rates go up (but there is never a drop in rent when they go down). fortunately my landlord is a bit more open/transparent and doesnt try to lie about the reasons for rises - the last one he said it was because similar properties were fetching higher rents, which was true.
 
Mine is fixed for the next 4.5 years at 5.19% so neither will I. :D

Although the PPOR is variable, which isn't deductible. :mad:

I Won't be lifting mine either. 5.56 atm rates rising don't bother me. Would need to get to about 15% before i would start to negative gear...
 
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