RBA issues rates warning.

Bludger, hasten slowly mate,

Look here also:

http://www.somersoft.com/forums/showthread.php?t=43730

I think aside from the actual rates themselves, we will see lending criteria tighten as far as LVR's and actually being able to secure credit.

The days of the banks/lenders throwing money at us for more IP's, boats, cars, etc are over for the time being.

It will be even more important to diversify debt with different lenders to keep single debt exposure low with each lender.........margin calls such as in shares may not be too far away for high LVR borrowers, especially if they're with the one lender. Even if people are not x-coll'ed, all money clauses may come into play.
 
I had an interesting discussion with a non-conforming lender this afternoon. Non conforming funders get money from interesting places and as a result their cost of funding tends to be a higher rate than other lenders, even on their rates for customers with the better risk profiles.

Due to the source of their funds, this funder hasn't had to increase their interest rates outside of the RBA changes. As a result their prime lending is now cheaper than some of the major banks.

Given that the credit crisis is far from over, it's reasonable to anticipate that lenders will raise rates again in the future. I'm starting to think that some non-traditional funding sources may end up cheaper and more secure than traditional lenders such as the big four banks.

I don't see the RBA increasing their rate next month. They'll wait until the see the fallout from the banks own movements before being the bad guys again.
 
TheAnalyst said:
it is strange you feel the rate is on the way up. But all people are talking it is on the way down.
http://www.theaustralian.news.com.au/story/0,25197,24022616-20142,00.html
Click to expand...

From the article you linked:

The RBA said second-quarter inflation data due July 23 would likely show a rise in the consumer price index "of over 1 per cent in the quarter".
Click to expand...

From the Australian Bureau of Statistics website:

http://www.abs.gov.au/AUSSTATS/[email protected]/mf/6401.0

Look at the weighted average of eight capital cities (all groups) percentage change in March quarter. That is what people call the CPI index. It is 1.1 percent for March.

Now if last quarter it was 1.1 percent and this quarter the RBA says that it will be "over 1 percent" what makes you think that rates are on their way down. If anything CPI is on its way up.

Sorry the commentators (and the general population) are in denial. The numbers speak for themselves. *Unless* we get a shock result and the RBA is wrong and the July CPI drops below 1 percent. But I sure as hell am not betting on it.
 
I don't really think the property market prices going down and interest rates going up makes investing in property all that different....... My thoughts.

Example 1.

Property price in a sellers market where interest rates were at 7.5% and property prices were high as competition is high and rents were average
Purchase Price $300,000 + Stamp duty in (SA) = $13,193, Total = $313,193, borrowing the whole amount P&I @ 7.5% = $505p.w. with rent return of $290p.w. = difference of $215p.w.

Example 2.

Property prices in a buyers market with interest rates at 9.5% and property prices lower as there are plenty of bargains and no competition when buying and rents are good or on the increase.

Purchase the same property now at a bargain at $270,000 + stamp duty in (SA) = $11,582, Total = $281,582, borrowing the whole amount P&I @ 9.5% = $546p.w. Rents better at $310p.w. = difference of $236p.w.

The difference is like $21 p.w. Would this stop you buying your next investment property?
 
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All I know Matthew is that 30 years from now its going to make 3/4s of stuff all difference if I stuff up and pay $20k too much.

And I dont develop so my holding cost risk profile is less.
 
How much steeper do you think the RBA want this owner occupier monthly dwelling commitments curve?

0_22E2_OpenElement_FieldElemFormat_gif.gif
 
eKwatee
It is not black and white, yield will vary depending on State and location of IP.

WA currently lowest, averaging 3% yield. Those property bargains you mentioned do not look too attractive with stats at 5% and IR close to 10%.

For those trying to accumulate properties I think it will be difficult, and for investors holding 10+ properties it will most definately hurt.

I am awaiting on mail this week, ING, RAMS and Westpac on the increase, last week it was SGB.
 
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MTR said:
eKwatee
It is not black and white, yield will vary depending on State and location of IP. WA current average 3% yield.

Will it hurt?? if you are holding 10+ properties it will most definately hurt. I am awaiting on mail this week, ING, RAMS and Westpac on the increase, last week it was SGB.
Click to expand...

I see your point and can see how it can hurt if your currently holding 10+ properties etc and you see your repayments constantly increasing but no matter what the market is doing if the figures stack up, and your looking to buy, any time should be ok...... Yes?/No?
 
Blue Card! said:
no, but it might stop me developing - holding costs can kill.
Click to expand...

I agree, I think there are way to many good buying opportunities of established properties at the moment, than to develop your own. Not only can the holding costs kill you but the costs of construction materials and labor shortages.
 
boomtown said:
Behold - its dueling graphs! How much less steep do you think the RBA want this CPI index curve? Ill give you a hint - they want it go down in 2008 not keep rocketing up. Your curve is just collateral damage.
Click to expand...

From the last ABS cpi release.

OVERVIEW OF CPI MOVEMENTS
  • The most significant contributors to the increase this quarter were automotive fuel (+5.4%), pharmaceuticals (+13.1%), house purchase (+1.7%), electricity (+6.0%), rents (+2.0%) and other financial services (+2.0%).
  • The most significant offsetting decreases were for furniture (-3.6%), audio, visual and computing equipment (-5.8%), domestic holiday travel and accommodation (-1.4%) and accessories (-5.3%).



So the RBA want us to stop consuming so much :
- automotive fuel - ok lets all get the train, but they are full, in Melbourne at least.
- pharmaceuticals - ok, doc, can I halve my BP medication?
- houses - got that covered (see above graph)
- electricity - hmmmm, no heating for grandma this winter...
- rent - ummmmm, RBA I am all ears on that one.
- financial services - hmmmmm, have to stop using credit cards for staples.

The above all look like staples to me....except houses and financial services.

Could it be the RBA have an ulterior motive?
 
i'm being serious here - how do you make money out of rising interest rates?

we all know the IMF wins every time, so how do i get a slice of the action?
 
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