Rates heading which way?

[Player]

Because im trying to decide whether to fix my rate or not (6.3% is looking attractive) or should I hold on and see how the market plays out in 2012 to try and fix at a lower rate. I would feel safer chasing a lower rate knowing that the market is predicting it.

As you mentioned, interest rates are a cost of doing business which you want to minimise if possible.

I am not so sure that the market is predicting softening by the nice three year fixed rates on offer of late. People aren't borrowing and the larger lenders are enticing new customers or existing customers re-financing to increase their borrowings. I don't see the generosity of the larger financiers as a leadding indicator in this environment.

I just refinanced fixed for three at 6.29 % and have a large one coming off fixxed in Feb. If variable rates do drop significantly you may find the juicy fixed rates start rising again. I don't see the RBA cutting in a hasty manner unless Armageddon eventuates with Eurozone issues and they need to stimulate.

Just my 0.02.

 

[Belbo]

I am not so sure that the market is predicting softening by the nice three year fixed rates on offer of late. People aren't borrowing and the larger lenders are enticing new customers or existing customers re-financing to increase their borrowings. I don't see the generosity of the larger financiers as a leadding indicator in this environment.

I just refinanced fixed for three at 6.29 % and have a large one coming off fixxed in Feb. If variable rates do drop significantly you may find the juicy fixed rates start rising again. I don't see the RBA cutting in a hasty manner unless Armageddon eventuates with Eurozone issues and they need to stimulate.

Just my 0.02.

This could be a very prudent call, Player (I'm very tempted myself to fix now to be honest), but 'sentiment' suggests that fixed rates could go some 0.5% lower (to put a my best-guess figure on it). Are you expecting banks to resist matching any RBA cuts (that is, without entering Euorzone Armageddon territory), so fixing now instead of holding out for a quarter or two is worth more thoughtful consideration?

 

[Propertunity]

Are you expecting banks to resist matching any RBA cuts ...

A few weeks ago Ralph Norris from CBA came out saying as much

However, non-bank lenders are becoming more active in the marketplace post GFC and the threat of competition may see them comply.

 

[Player]

A few weeks ago Ralph Norris from CBA came out saying as much

However, non-bank lenders are becoming more active in the marketplace post GFC and the threat of competition may see them comply.

Bingo! That's why IMO the banks are putting these sweeteners out there. They may not be necessarily going to match the minors point for point on variables, however to lock in their customers the fixed rates are looking good right now. In this environment I am not so sure that the fixed rate drops are going to be a lead indicator of what's to come on a variable level. Of course I could be wrong

Mr Belboa, my thoughts on fixing are here:

http://www.somersoft.com/forums/showpost.php?p=839369&postcount=9

I can control my largest fixed cost and optimise my sleep. It is never about beating the banks for me. No one can ever beat them. For those who need more flexibility, fix some/most and leave a component variable. Personally I already have buffers/offsets lined up on other variable products, so fixing largish loans locks in my interest for the next three or five years. I am not fixing everything. Liquidity on some assets is still important. Depends on the type of portfolio each person has.

 

[james_w]

hoping for down voted on hold think they will stay on hold for a little while yet

 

[shuggy]

we'll be extremely hard hit with interest rate rises regardless of what the RBA does

Some here are aware i've got a property being auctioned next Saturday so the agent is now playing his role to condition me down in price . What do the informed think about this message he sent me ... can anyone fault his logic so i can reply to him in a way which makes him think i know what's going on

As far as interest earned in a bank, I think you will find that once Greece defaults and the interbank cash flows seize up, the cost of international money will skyrocket , since Australian Banks get half their money on the international money market we will be extremely hard hit in terms of interest rate rises regardless of what our R.B.A does.

 

[TomW]

Some here are aware i've got a block of units on the Gold Coast being auctioned next Saturday so the agent is now playing his role to condition me down in price . What do the informed think about this message he sent me ... can anyone fault his logic so i can reply to him in a way which makes him think i know what's going on

As far as interest earned in a bank, I think you will find that once Greece defaults and the interbank cash flows seize up, the cost of international money will skyrocket , since Australian Banks get half their money on the international money market we will be extremely hard hit in terms of interest rate rises regardless of what our R.B.A does.

I think once Greece defaults it will be like the fat lady singing as far as Australian property goes.

 

[shuggy]

I think once Greece defaults it will be like the fat lady singing as far as Australian property goes.

So if Greece defaults that means Australian property will take a dive due to interest rates shooting up (regardless of what the RBA does) ?

 

[Intrinsic_Value]

Some here are aware i've got a block of units on the Gold Coast being auctioned next Saturday so the agent is now playing his role to condition me down in price . What do the informed think about this message he sent me ... can anyone fault his logic so i can reply to him in a way which makes him think i know what's going on

As far as interest earned in a bank, I think you will find that once Greece defaults and the interbank cash flows seize up, the cost of international money will skyrocket , since Australian Banks get half their money on the international money market we will be extremely hard hit in terms of interest rate rises regardless of what our R.B.A does.

Oh so now realestate agents are experts on the cause and effect relationships of international finance.

If he is so confident, ask him to put it in writing, and guarantee it.

 

[Intrinsic_Value]

Greece IS going to default. There is no question of it, its a 100% certainty.

So we have the cause, but we do not know the level of the effect.

 

[shuggy]

Greece IS going to default. There is no question of it, its a 100% certainty. So we have the cause, but we do not know the level of the effect.

The link to the interest rate futures market showing a 1% drop in the cash rate by April 2012 might indicate Greece defaulting is already priced into it

 

[VYBerlinaV8]

The link to the interest rate futures market showing a 1% drop in the cash rate by April 2012 might indicate Greece defaulting is already priced into it

Quite possibly. I still maintain the view that the RBA will resist changing rates for a while.

 

[TomW]

So if Greece defaults that means Australian property will take a dive due to interest rates shooting up (regardless of what the RBA does) ?

It will take a dive due to the financial tsunami that will hit Europe and flow on to the US and Asia.

 

[Intrinsic_Value]

The link to the interest rate futures market showing a 1% drop in the cash rate by April 2012 might indicate Greece defaulting is already priced into it

yes but thats the movement in relation to RBA rates.
Your gallah of a realestate agent is linking the cause (greece) to the effect (australian bank funding costs) and saying that the effect will be a huge rise in bank funding costs, so much so that interest rates will increase no matter what the RBA does.

This is complete b.s. Yes there will be an effect, but that effect could well be very small as both the market and the Australian banks have had plenty of time to prepare for it.

So like i said, ask him to quanitify it (ie put in writing how many % the interest rate will rise and then ask him to guarantee his opinion if he is wrong).

 

[shuggy]

yes but thats the movement in relation to RBA rates.
Your gallah of a realestate agent is linking the cause (greece) to the effect (australian bank funding costs) and saying that the effect will be a huge rise in bank funding costs, so much so that interest rates will increase no matter what the RBA does.

This is complete b.s. Yes there will be an effect, but that effect could well be very small as both the market and the Australian banks have had plenty of time to prepare for it.

So like i said, ask him to quanitify it (ie put in writing how many % the interest rate will rise and then ask him to guarantee his opinion if he is wrong).

Thanks I'll let the pillow biting gallah know though i doubt he'd quantify anything without a commission .. i suspect he lifted his theory of central banking and money supply from google to look clever.

 

[VYBerlinaV8]

http://au.finance.yahoo.com/news/RBA-reaffirms-possible-aap-1902405167.html?x=0

Some more news from the RBA.

I still think the RBA will want to keep rates of hold as long as they can to give them lots of room to move should Europe implode.

 

[Aaron Sice]

http://au.finance.yahoo.com/news/RBA-reaffirms-possible-aap-1902405167.html?x=0

Some more news from the RBA.

I still think the RBA will want to keep rates of hold as long as they can to give them lots of room to move should Europe implode.

while i voted decrease - i'm with you.

nothing has changed since this thread was started, so i don't think there'll be a reprieve over christmas.

i think the world could go to hell in a handbasket over christmas - but that's stargazing.

with the stock market up, up, up these past few days and the AUD on a rise, i smell put hoarding before the slip.

 

[VYBerlinaV8]

while i voted decrease - i'm with you.

nothing has changed since this thread was started, so i don't think there'll be a reprieve over christmas.

i think the world could go to hell in a handbasket over christmas - but that's stargazing.

with the stock market up, up, up these past few days and the AUD on a rise, i smell put hoarding before the slip.

There certainly don't seem to be any imperatives to drop rates (although inflation data is out Wednesday I think).

To hell in a handbasket? Possibly, but my reading seems to be suggesting that most parties are now taking their problems pretty seriously, and are getting to the point of working towards real solutions (even thought of them really don't like it). At this point, my stargazing is that things aren't going to change so much for the next year or so, at which point we'll have a much better idea as to how Europe is going to go.

 

[Aaron Sice]

To hell in a handbasket? Possibly, but my reading seems to be suggesting that most parties are now taking their problems pretty seriously, and are getting to the point of working towards real solutions (even thought of them really don't like it).

it involves change, which spurs panic.

remember, change is bad kids, m'kay.

 

[seano4ever]

As far as interest earned in a bank, I think you will find that once Greece defaults and the interbank cash flows seize up, the cost of international money will skyrocket , since Australian Banks get half their money on the international money market we will be extremely hard hit in terms of interest rate rises regardless of what our R.B.A does.

Really? I would of thought that if Greece defaulted, that would put more pressure on the RBA to reduce rates... Or maybe I'm just reading it wrong...

If the international money money is hit hard with interest rate rises (which is passed onto us), yet at the same time the RBA slashes rates, how do you know which factor will effect us more?