This reminds me of when i was paying 17.5% int rate and it dropped to 13%, some were saying that rates will go back up so don't borrow too much.
Back then int rate rises and falls were at least 1% , now their .25% and have the same impact.
So what if int rates come down to 3% and we get .1% int rate changes.
There doesn't appear to be much difference between.....
100k at 17.5%=17k
300k at 6% =18k
500k at 3% =15k
Maybe this is where we are heading?
Cheers
Generally it is great example. I am bending backwads trying to send a message for people that "double digit" interest rates well and truly thing of the past. The more debt level is, the more each percentage point of interest rate rise takes money from the economy.
Finally, even Glen Stevens said that 2% of interest rate rises "in a good time" is a max that RBA is able to afford without destroying the economy.
Simple as a whistle - back in 1990s we had 45c of debt per every dollar earned. Now we have about $1.70 of debt for every dollar earned. 17.5% rates destroyed economy back then, therefore you need 3-4 times lower interest rate to destroy it now - hence we arrive of max figure of 4-5%.
7.25% that destroyed economy the last year was only achievable with the help of a resource bubble, which luxury RBA no longer has.
In brief - interest rates is no longer thing to worry about.