november/december interest rate thread, 2nd poll

[MichaelW]

I went for 0.75%.

I picked the 0.25% this month that most weren't considering. I think they'll go 50bp in November and another 25bp in December.

All up will see 100bp (1%) rise back to 4% rate by Christmas. Discounted variable rates around 6%. I did think they'd hold off at lower rates but everything I read from Glenn Stevens now suggests a race back to Neutral. At a minimum, we'll see 25bp and the high probability outcome is 50bp, but I'm going out on a limb and calling 75bp.

Lets see what happens...

Cheers,
Michael

 

[boz]

Michael could be right,
today, after RBA statement odd for a 50 basis point rise in november doubled to 22% and also a rise in december is expected, today I change my forecast again to 0.5% by year end (but i voted +0.25%).

 

[TheAnalyst]

I went for 0.75%.

I picked the 0.25% this month that most weren't considering. I think they'll go 50bp in November and another 25bp in December.

All up will see 100bp (1%) rise back to 4% rate by Christmas. Discounted variable rates around 6%. I did think they'd hold off at lower rates but everything I read from Glenn Stevens now suggests a race back to Neutral. At a minimum, we'll see 25bp and the high probability outcome is 50bp, but I'm going out on a limb and calling 75bp.

Lets see what happens...

Cheers,
Michael

Big call michael. I believe RBA will not be so aggressive time time and will take a slow step. It was a giant step for them to raise the rate first in the world. I believe the problem is the excessive government cash splash - free everything. I just could not get why the inflation figure is not high given that we see almost everything is up a lot (such as clothing, food)... It is really strange to me.

 

[sash]

Slow and steady wins the race.....

The RBA governor is planning a slow and steady increase in rate....he will do 0.25 in Nov followed by another 0.25...then another in Feb. at 0.25....another 0.25 in March...another 0.25 in April...before a pause for breath.

A feel chuffed that most of my rates are below 5.7%...I will break even very soon on most of my loans. I am now even considering breaking some of my fixed loans!

 

[PeterC]

A feel chuffed that most of my rates are below 5.7%...I will break even very soon on most of my loans. I am now even considering breaking some of my fixed loans!

remember you dont break even until sufficient time passes after your fixed rate is under the variable rate, to make up for all the months so far that you've been paying extra above the variable for that fixed rate. a lot of people think they 'break even' as soon as the variable rates exceed their fixed ones, but you've still got more to go past there to get even! (and in many cases, the fixed period will elapse long before you do).

 

[josko]

Can we start again?

I've changed my mind.

Regards JO

 

[sash]

Peter,

My break even point for the ones i fixed in April are hopefully in November when the variable rate is expected 5.6%. These were fixed at 5.28% - 5.49% or under! So if there there are 2 more rate rises between now and Feb. 2010...I will have broken even after about 10 months! Most of these will have about 14-26 months for them to come off the fixed rates.

The ones I fixed in August are between 5.65% and 5.79%....I suspect I break even on them around Feb. 2010 also.....after just six months....so I will have another 18-30 months of rates lower than the previaling interest rate in the future.

Now this could all come undone if the rates don't go up!

remember you dont break even until sufficient time passes after your fixed rate is under the variable rate, to make up for all the months so far that you've been paying extra above the variable for that fixed rate. a lot of people think they 'break even' as soon as the variable rates exceed their fixed ones, but you've still got more to go past there to get even! (and in many cases, the fixed period will elapse long before you do).

 

[Peter 14.7]

Hey Josko, you got to vote, then read and not change

MW puts a good case. I agree RBA want to get to 6% ASAP but I think politically a Nov rise of 0.5% and another of 0.25% in Dec would be hard to swallow. It would also kill consumer spending in X mas or would it? The last 0.25% “bow shot” got little to no media impact.

The IMO factors are:

We are still only at 5.4% (after wealth package deals) and that is the still lower than previously in my investment career.

The average Aussie (PAYG, making $50k, 30yr mortgage, simple life) has (according the reports) seen little to none impact from GFC except lower rates and $900 + $1k each kid in cash.

Globally, we have the US stuff(ed) , UK and EURO still not healthy, and lot of faith based on new President Obama, starting to wane.

Locally, we are still making $$ from just digging the ground and (fingers crossed) the drought (read food prices) appears to be abating a bit in VIC and parts of NSW. Oh and $ high so petrol low. It is all good!

Thus it is really hard to call the future on rates. Do we focus locally or globally?

So is it time we forget about OS and focus here. If so then MW is right …we need to 6% to avoid a massive property boom and then bust. If we don’t we could see 7% a lot quicker.

Anything under 7% is good times. CF+ for most of us here.

I subscribe the RBA uses fear of rates to get the outcome they want, than actual rates. They want house prices to stop rising. They want FHO to stop overspending. So if 0.25% (unexpected) got no impact, up the ante with 0.5%.

Ironically, any rise is a signal all is better and stay spending. The reverse of what they want to achieve.

Peter 14.7

 

[Spectre]

Apparently tip is that there could be 7 rises in a row
http://www.brisbanetimes.com.au/national/seven-rate-rises-in-a-row-tipped-20091016-gzj5.html

Seven rate rises in a row tipped
TIM COLEBATCH
October 16, 2009 .

A declaration by Reserve Bank chief Glenn Stevens that the bank would not be ''timid'' about raising interest rates has led financial markets to tip seven interest rate rises in a row, while the dollar has surged to 92.23 US cents.

-rest of article in hyperlink


However IMO - if people's overtime/shift keep getting cut and you're seeing unemployment/defaults arise as a result...

 

[Peter 14.7]

Big Call and against most other economists.

But even so...so that would take variable rates , after the average wealth package discount to around 7.2%. No low but not high.

Again, overseas is the key. If this call is right, then as the rest of the world recovers, we would see more inflation as our $ drops, petrol goes up, etc. IF so this could slow spending or require even more rate rises.

Personally, I have given up, I can;t control rates and my chance to lock has passed (although in my defense, CBA never did offer great fixed rates). So I working on increasing my income and decreasing spending to cover the rises, I can control that.

Peter

 

[Alex P Keaton]

Personally, I have given up, I can;t control rates and my chance to lock has passed (although in my defense, CBA never did offer great fixed rates). So I working on increasing my income and decreasing spending to cover the rises, I can control that.

Peter

I decided to go SV for my loan. I know that the IR will be a lot higher in 1 and 2years time so in the meantime throughout 2010 I am going to be very strict on my spending. I have started to write down everything i'm spending money on (and I mean everything) in a book just so I can keep myself accountable and on track. Then when the rates do rise I'll have a bit of savings put away in readiness for it.


The rental income for my ip will pretty much cover my loan repayments at the current IR of 5.36%. Its close to neutral. I havent worked out the other expenses yet though such as PM fees, insurance, strata etc. But the repayments part of it is close to neutral. Plus I may have some unexpected expenses come up and that might eat into the amount I can save.

I should be ok to get through the next few years.


I am wandering though if IR do get to 8% how long they will stay there for?


But by then my rental income will have gone up to help with the higher repayments so that should help

 

[investor2009]

Now, who was it saying they weren't expecting to see signs of a recovery until 2011...?

 

[Alex P Keaton]

Now, who was it saying they weren't expecting to see signs of a recovery until 2011...?

that was back in may when i created that topic

 

[boz]

seems today inflation number cooled the expectation of rate rises (at least chance for a 0.5% in november are down to 10%).
link from bloomberg:

...
“Anyone worrying about inflation in the near term is barking up the wrong tree,” said Prasad Patkar, who helps manage about $1.3 billion at Platypus Asset Management in Sydney. “Today’s report probably won’t alter the RBA’s stance on gradually withdrawing monetary stimulus from ‘emergency’ levels.”

The Australian dollar fell to 91.41 U.S. cents at 12:15 p.m. in Sydney from 91.80 just before the report. Australia’s two- year government bond yield declined 8 basis points to 4.85 percent. A basis is 0.01 percentage point.

Bets Pared

Investors are certain Governor Stevens will increase the rate by a quarter point on Nov. 3, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. There is also a 10 percent chance of a half-point increase, the futures showed at 12:37 p.m., down from 16 percent prior to the report.

Food prices fell 0.8 percent and health costs slipped 1 percent in the third quarter, today’s report showed. By contrast, electricity costs rose 11.4 percent and gasoline advanced 4 percent.

The median estimate of economists surveyed by Bloomberg News was for annual inflation of 1.2 percent.

The Reserve Bank’s core inflation measures, which exclude the largest price increases and declines, were also published today.

The weighted-median gauge of inflation advanced 0.8 percent in the third quarter for an annual increase of 3.8 percent. Economists forecast gains of 0.8 percent and 3.7 percent respectively.

“The Reserve Bank is on a path back to neutral but there’s nothing in the data that suggests they have to ramp up their rhetoric or their tightening,” said Annette Beacher, senior strategist at TD Securities in Singapore.

...

 

[Aaron Sice]

rates going up next meet - 0.25% - at the expense of the east coast.

 

[Mike&Wendy]

Just curious but aren't option 2 and 3 the same?

A 0.25% rise each month, or a total of 0.5%.

Or, should option 2 also say total?

Mike.

 

[Lynchy]

You would presume it mean .25% for one of Nov or Dec. If it didnt mean that then there wouldnt be that option

 

[Mike&Wendy]

It wasn't really a serious question, I was just pointing out a slight ambiguity. It was only after I read someones reason for picking 0.75% I realized it was for both months.

Mike.

 

[kero]

stock market caught a cold... need some rest.

and yesterday's inflation figures, according to the treasurer due to increase in power prices in NSW and NT... and also national home prices... not as if, all the states and territories' economies are improving in sync.

i vote no change.