Time to Fix Rates Now?

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From: Simon St John


Hi everyone,

"Your Motgage Weekly" has the following article this week.

Is it time to fix interest rates?

Cheers, Simon

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"The Big Four banks are now predicting that there may be interest rate rises just around the corner, but they are suggesting that rates may not rise by more than 1 - 1.5 per cent.

This prediction by the economists is based on signs of recovery in the US economy, good economic data in Australia and confidence expressed in recent business surveys.

Surveys released this week (the Westpac/Australian Chamber of Commerce quarterly survey of manufacturers, and the National Australia Bank?s broader monthly survey) have revealed further optimism in the business sector. The Dun & Bradstreet survey gathers information from retailers and domestic manufacturers and has also found an improved outlook.

The January housing figures showed a 2.8 per cent jump in lending for new homes despite the $14,000 First Home Owners Grant being scaled back to $10,000.

While the government may want the RBA to focus on growth and the most recent statements from the RBA are skeptical when it comes to increasing rates at the moment, market watchers now feel that a rate rise within the next six months will be inevitable.

While the banks are not giving any firm predictions beyond the next 12 months, they say that the current low rate of 4.25 per cent may be increased to a more ?neutral? range of 5.25 to 5.50 per cent."
 
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Reply: 1
From: Gerard Caruana


Yesterday I was at a BIS Shrapnel seminar, where they agreed with the banks sentiment. Looking further ahead, they predict housing loan rates to reach 9%+ by 2005/2006, which makes for some interesting thought. Mind you these guys have got it wrong before. I will be negotiating 5 year terms for my roll overs in the next couple of months.
Cheers,
Gerard C
 
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Reply: 1.1
From: Carlo Chiodo


Keep an eye on Bank fixed v variable rates.

Movement in the variation between the two can indicate what the banks think the treasury is going to do.
 
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Reply: 1.1.1
From: Paul Zagoridis


Important to remember that more economists do not mean better predictions.

When interest rates hit 17% in the early 1990's banks had locked rates in at 13.5%

And there were people who fixed at 18%+

ouch!

Paul Zag (B.Ec. for what it's worth)
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