Interest Rates... Which way next ???

[triv]

Hi All,

I'm currently in the process of refinancing my PPOR and i'm toying around with the idea of fixing a portion of it at 7.29% for 3 yrs. I won't be moving in the next 3 yrs.

My crystal ball is currently off getting repairs done so i'm after any thoughts / opinions of which way rates may go next. I have just finished reading an article which suggests the next move will probably be down.... most other commentators have been suggesting 1 or 2 rate rises this year.

Any thoughts

Cheers

 

[Mr. Fabulous]

Anticlockwise.

 

[Andrew_A]

Hi All,

I'm currently in the process of refinancing my PPOR and i'm toying around with the idea of fixing a portion of it at 7% for 3 yrs. I won't be moving in the next 3 yrs.

My crystal ball is currently off getting repairs done so i'm after any thoughts / opinions of which way rates may go next. I have just finished reading an article which suggests the next move will probably be down.... most other commentators have been suggesting 1 or 2 rate rises this year.

Any thoughts

Cheers

Crystal balls are great, especially when you can charge for people viewing them!

I find Richard Farleigh's rules to be powerful and true based on my experience. I refer in this case to Farleigh's rule 1.6

1.6 Respect the market not the experts

What the market is saying about the next rate movement

What the market is saying about the next 18 months (.pdf file)

The benefit of the market's opinion here include

* Accountable
* Testable (Think you have a good crystal ball.. ok let's measure)
* Backed by real money
* Mixes and mashes all inputs as best weighted by money on the line; down to a number and not an opinion

That's just the markets view on the cash rate however, there are other considerations when it comes to fixed rates, your own personal situation and so on.

 

[Humphrey]

That's interesting. Do you have any data which shows Cash Rate Futures against actual movements?

 

[Marty McDonald]

Agree markets can be wrong but they are the best indicator around. Also from my experience the futures markets are not usually wrong about trend (currently up) they just can't get the timing 100%. It would take a sharp up tick in unemployment and or a sharp drop in economic activity for rates to be lowered both of which seem unlikely failing a black swan type event. Also last time mortgage rates got into the 8's things started to slow and there was some pain out there so I dont think it would take many more rba increases to slow things down so maybe the value in fixing has already passed. I am currently only recommending clients fix if they are close to their affordability ceiling as is.

 

[Andrew_A]

That's interesting. Do you have any data which shows Cash Rate Futures against actual movements?

Would be interested in viewing a good chart myself. I suggest a good way to learn about the drivers of the cash rate is to plot the 90 day bank bill against the cash rate, I did have a long term chart current till a few years ago, perhaps there's something more recent around somewhere?

90 day bank bills

 

[Token Funder]

I'll admit to having a somewhat unfashionable view as to movements this CY. I'm expecting 25bp mid-year and another 25bp October/November! The RBA still has inflation in its sights and seems to be enjoying the deleveraging it's seeing on household balance sheets.

 

[imonmyway]

I fixed with St george in January at 7.09% for 3 years dont know if that rate is still available but you had to ask for it as it wasnt advertised