Interest rates to hit 1.5% - Credit Suisse

[Paul@PFI]

When rates move they will move in one direction and likely progress smoothly. The risk is that the change has a higher upside risk v's downside. While flat seems logical now with dampened growth, poor commodity prices etc the yield curve does suggest if it growth takes off (?) that the RBA wont hesitate to use rates.

Progressive small rises of .20-.30% quickly add to 1.5% taking the avg variable rate up over 6.25%

 

[Paul@PFI]

A further problem with rising rates is that banks WILL increase their rate above the RBA cash rate change.

I wont go into the technicalities. I used to work in a major bank money market operation. Let me say that a 1% margin at 5% is not as profitable as 1% at 6%...The margin has to increase from 1% to 1.3% to make the same $ profits.

So I predict for every .25% increase in cash rates you can expect a .30-.32% + increase by every lender. That's going to make media call the banks busterds again but it wont stop them