Interest Rates - where now??

[MTR]

Was chatting to an agent this morning and he started discussing interest rates and mentioned we may see a rate increase next year.

I just do not see interest rate rises happening any time soon??? Would like thoughts/opinions on this.

I am enjoying the property market at the moment, plenty of markets to make money, don't want it to come to a grinding halt.

Thanks

MTR

 

[Ausprop]

Westpac's chief economist predicts 2 rate cuts early next year

 

[MTR]

I would expect more cuts as well.
Wonder if this will help bring the Au$ down, seems to have bounced back.

 

[o0o]

I don't see them getting much lower.. the RBA are mindful any more cuts will continue to fuel the bubbling property market and that isn't good. I hope they increase them and the AU$ goes above parity again.

 

[coola71]

Westpac's chief economist predicts 2 rate cuts early next year

I also know that westpac raised their fixed rates this week especially the 5 year rate. Tells a story?

 

[bumskins]

It's pretty hard to predict, given how much circumstances can change.

My guess is maybe another 1 or 2 quarter percent cuts at most before reversal.

The RBA will be very hesitant to leave rates "too low, for too long", they can already see the affect its having on home prices.

Also the lower we go, the quicker rates will probably spring back up on the other side.

As rates go back up, we'll see that reversal from risky back into safe assets again as well as the hits to affordability.

 

[VYBerlinaV8]

http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf

I've been watching this fairly carefully the last few months, and the short term numbers have risen, so I'd say another cut is almost impossible, barring some major event.

 

[Ausprop]

I note NAB is also forecasting cuts in the first half of next year.

CBA thinks they have bottomed out but won't move for a year or so.

http://www.theaustralian.com.au/bus...s-rates-forecast/story-e6frgac6-1226723909128

 

[Colin Rice]

CBA thinks they have bottomed out but won't move for a year or so.

I would agree with this ^^^^

 

[INVSTOR]

I would be happy to fix my new purchase for 5 yrs in current market.

 

[euro73]

Trying to predict rates is only going to do your head in... so many external factors that play a role.

Unemployment remains low, so it's not really going to be an influence.

But if prices keep rising, the RBA will probably have to act to curtail a bubble, by increasing rates.

On the flip side- if the US defaults and the Euro and US dollar crash, the AUD may surge again and that will create pressure to cut rates.

The RBA has a tough couple of years ahead- trying to take steam out of the dollar whilst not allowing a housing bubble to build...

I guess they could do both, but it may require some extreme form of policy shift, like reducing LVR's to 80%, or removing Neg Gearing. That would allow them to cut rates and stop a property price bubble... but it would also carry the real risk that it may stop property in its tracks on bring on a crash as first home buyers cant participate and investors stop participating altogether.

They may ultimately be left with a choice between a property bubble or allowing the dollar so high that the economy tanks anyway, and all of it driven by external influences, rather than Australian influences.

Which do you believe would be the lesser of the two evils- a bubble that eventually implodes, or a sliding economy because of a high AUD?

 

[Peter_Tersteeg]

I am 100% certain that rates will increase, but they may drop further beforehand.

Seriously, rates are currently so low that at some point they will increase. If you're not factoring this in to your lending decisions, then you're probably asking for trouble. Further rate drops only indicate that we're suffering economically which is not a good outcome.

 

[D.T.]

What about if RBA goes the other way and legislates capped LVR instead? Then they can more easily address all the other 'external influences' by increasing/decreasing rates as needed?

 

[buster]

What about if RBA goes the other way and legislates capped LVR instead? Then they can more easily address all the other 'external influences' by increasing/decreasing rates as needed?

Regular banks already do that, when they decide how much they will lend they account for ability to pay higher rates, as they know they will go up.

 

[Rolf Latham]

non expert opinion from my tinnie on the Nerang River rather than Liberty in the Bahamas.

Economy okish but slowing ................inertia is toward slowing more quickly even

Mother Hubbards cupboard empty, well not just empty, but maybe there are a bunch of mice we need to feed since we borrowed a little more cheese than we thought.

I see further stimulus needed, with RBA coming off at least another 50 pts.

I can still see Fund managers soon pricing 5 year fixed rates which may result in some sub 5 % retail 5 year fixeds............

Any property "bubble" is collateral "damage" or gain in the wide- scheme of things depending on which side of the fence you sit. Being a property forum,we get a bit self focussed and engrossed on that aspect

Diff to see any logical reason why the RBA would throw water on smouldering ember fire.

More woof wood now.

ta
rolf

 

[buzzlightyear]

The 'bubble' talk is absolutely frustrating and so misguided. So we have increases in Sydney and in some limited areas in Melbourne. That's it!

2 minutes of sunshine, and we are calling it a heatwave

As for interest rates, the RBA have clearly said they want a lower AUD. Aside from an improving US economy which will do that, there are very little effective policy levers that will drive it lower. I am not sure even a 25bps cut would make a difference to be honest. But can't see the RBA reducing by 50bps IMO.

They want housing construction to improve the economy but that's only going to happen if those supplying this, can see improving prices ie what's happening in Sydney right now. Lower rates helps to do this, but feeds into their same arguments, that any increase is a 'bubble' and so, undesirable.

As an aside, didnt WBC increase their 5 year fixed mortgage rate a couple of days ago by 50bps?

 

[Rolf Latham]

Didnt WBC increase their 5 year fixed mortgage rate a couple of days ago by 50bps?

dunno............

whatever individual lenders do in isolation is Background noise.

When a 2 or more jump in unison, you have a fair indication that that fund managers are having more positive outlooks for middle to long term

ta
rolf

 

[Spectre]

We had this question with a lender panel a few weeks ago. Some have no opinion, the rest dodge the question.

I tend to keep an eye on the asx graph daily. It could be out but I figure the combined knowledge of those guys is more than one person has.

Given the volumes we're seeing coming through increasing, a cashed up FHB, I'm not seeing the 'panic' selling - libs in power, apparently this gives confidence... I dont really see a cut out of the RBA. The banks might cut a bit out as part of a marketing strategy

 

[Marty McDonald]

Pretty clear to me lol!

Seriously though my 2 cents worth is rba is on hold for the foreseeable future. I wouldn't be surprised if we see no change for the next 6-9 months.

 

[euro73]

Like I said previously, it will be a balancing act for the next 18-24 months...

Until a few months ago the RBA was probably slightly inclined towards 25 or 50bpts further cuts late this year or early next year, if for no other reason than to arrest the AUD and restore some competitiveness to our secondary industries like manufacturing, education etc, but they may defer that or even drop the idea IF residential house prices keep heating up...

There is no real "boom " in prices yet, despite some of the hype being thrown around - just a few pockets here and there which are showing life after several years of stagnation, but if it runs like this for another 6 -12 months, and if it spreads to other cities, the RBA may start to get anxious about things... but that's months away yet, and there's no real evidence it will happen , so all it is for the moment is speculation, and the RBA has time to watch it unfold before deciding what to do.

So ultimately - who knows? I don't. The banks economists don't seem to, and I assume the RBA doesn't really know yet either. Too many external factors at play , so I'm sure they'll take a "wait and see" approach and that just means we all have to do the same...