What will interest rates peak at this time ?

[Alex P Keaton]

Food for thought. ANZ have just changed their Fixed.

Up we go guys. Where it stops- no body knows.


ANZ Residential 1 Year Fixed Rate Home Loan & RIL 5.70% 6.50% +0.80%
ANZ Residential 2 Year Fixed Rate Home Loan & RIL 6.69% 7.34% +0.65%
ANZ Residential 3 Year Fixed Rate Home Loan & RIL 7.09% 7.69% +0.60%
ANZ Residential 4 Year Fixed Rate Home Loan & RIL 7.69% 7.94% +0.25%



Regards JO

According to ANZ's website the 3 year fixed is still 7.09%

Interest Rates on ANZ Personal products current as at Wednesday, 21 October 2009.

ANZ Fixed Rate (Home Loan Rates) Term Interest Rate Comparison Rate™ #
1 year 5.70% p.a. 6.08% p.a.
2 years 6.69% p.a. 6.25% p.a.
3 years 7.09% p.a. 6.43% p.a.
4 years 7.69% p.a. 6.75% p.a.
5 years 7.74% p.a.

 

[redwing]

In the UK

According to the Centre for Economics and Business Research (CEBR) interest rates will remain at 0.5% until at least 2011 and stay below 2% until the end of 2014

 

[josko]

oh crap, i hope my mb faxed my papers through to anz before the rate changed!! I hope I do get the 3 year fixed at 7.09 %.

Dammmmm ANZ arrgh


Product BreakFree Package Fixed 3 Year (IO)
Amount $199,000
Term 30 Years
Interest Only Term 3 Years
Interest Rate 7.09% pa
Repayments $1,176 per month

Hi Kim,

Did you pay a rate lock fee? If you didn't.....I regret to say you may have missed out on your earlier rate...

Regards JO

 

[josko]

In the UK

According to the Centre for Economics and Business Research (CEBR) interest rates will remain at 0.5% until at least 2011 and stay below 2% until the end of 2014

It's unfathamable. 2%!

Regards JO

 

[morg]

oh crap, i hope my mb faxed my papers through to anz before the rate changed!! I hope I do get the 3 year fixed at 7.09 %.

Dammmmm ANZ arrgh


Product BreakFree Package Fixed 3 Year (IO)
Amount $199,000
Term 30 Years
Interest Only Term 3 Years
Interest Rate 7.09% pa
Repayments $1,176 per month

Kim,
You do realise that after the 3 year IO period the loan will revert to P&I ?
Seems like in a very short period you'll be looking to refinance.
I'm sure you've budgeted for the increase already, but thought I'd mention it, just in case.

 

[Alex P Keaton]

Hi Kim,

Did you pay a rate lock fee? If you didn't.....I regret to say you may have missed out on your earlier rate...

Regards JO

No... didnt pay a rate lock fee. Only just decided yesterday afternoon to go ahead with fixed, but by then it was too late and it went up to 7.69%. I had a funny feeling this might happen cos I knew that CBA had moved a couple of weeks ago to around 7.5%. I wasnt fast enough.

Anyway I have decided to go SV 5.36% IR.

 

[Alex P Keaton]

Kim,
You do realise that after the 3 year IO period the loan will revert to P&I ?
Seems like in a very short period you'll be looking to refinance.
I'm sure you've budgeted for the increase already, but thought I'd mention it, just in case.

no i didnt realise that, thanks

 

[kotim]

Crazy t lock in interest fixed rates now. 2 things happen, interest rates to 7-9%, if this happens where in a boom anyway and so the value of houses and no doubt rent will also go up, so investers won't be hurt

OR Interest rates don't go up much becasue there is no boom.

Think about all the first home buyers over the last year or more who have bought into property at 5% interest rates. Research has revealed that they have tended strongly to borrow to the hilt at 5%, so if interest rates go to say 7%, many many many of those first home buyers will go under, if they go under the property market will not go anywhere.

Sad isn't it becasue we are creating the environment for collapse (10-20%) in capital areas) of house prices. There is a commercial property mortgage failure in America that is still in the early stages of an eventuall tsunami and along with it will be the collapse of some of the banks who have allready been bailed out. Once the finance institutions come under real pressure again then we will see a transfer of that problem to Australia.

 

[sash]

Kotim,

I agree that it would be crazy to fix now....I personally don't see interest rates going past 7.25% (cheapest variable rate).

As the rates head up the housing market will stabilise.....a few will go under as always...probably newbies who have never managed large levels of debt and got in with a very large FHOG early on!

Having said that I don't think..we will see housing collapse like the US. Personally, I think the govt. will change the grant to make new housing construction more attractive.

Rents will go up due to the large immigration programme which has kept Australia's economy afloat during the GFC.

Crazy t lock in interest fixed rates now. 2 things happen, interest rates to 7-9%, if this happens where in a boom anyway and so the value of houses and no doubt rent will also go up, so investers won't be hurt

OR Interest rates don't go up much becasue there is no boom.

Think about all the first home buyers over the last year or more who have bought into property at 5% interest rates. Research has revealed that they have tended strongly to borrow to the hilt at 5%, so if interest rates go to say 7%, many many many of those first home buyers will go under, if they go under the property market will not go anywhere.

Sad isn't it becasue we are creating the environment for collapse (10-20%) in capital areas) of house prices. There is a commercial property mortgage failure in America that is still in the early stages of an eventuall tsunami and along with it will be the collapse of some of the banks who have allready been bailed out. Once the finance institutions come under real pressure again then we will see a transfer of that problem to Australia.

 

[Ausprop]

Hi Kotim, with your scenarios -

scenario 1... rates go up and so do houses, so FHOs can sell out at a profit

scenario 2... rates don't go up because there is no boom, if rates don't go up FHOs don't get burnt.

so where is the downside here?

this all assumes the FHOs are indeed struggling young 20 somethings with the wife in thongs and a baby on the hip, which I think is a misplaced stereotype

 

[josko]

to also add,

Banks work out a clients serviceability at roughly 2% higher than the current interest rate.

I attended a breakfast on Friday for the Economic Outlook for 2010.

These things seem clear:

1- Interest Rates will rise to between 7.5% - 7.9% (I still say it will stay under 8!) and fast, as RBA tries to get a grip on the rate of inflation.

2- Australia IS in the middle of a Population Boom

3- There is a lack of housing supply. (Focus on NSW)

4- RENTS WILL INCREASE

5- There are many FHOB who did not enter the market and are still out there. There will NOT be a housing crash when the full FHOG ends as Investors will pick up the slack as Governement tries to push new housing and investment. I will be watching closely to see how our State Gvnt tries to implement this.

6. Unemployment has not been as bad as expected (or the media tried to claim.)

7.Consumer Confidence is strong.

8. Business Confidence has increased in the past three months.

It is very evident that our economy is in recovery.

We should be happy Interest Rates are rising and look forward to some nice growth in our properties.

Regards JO

 

[DeeHwa]

to also add,

Banks work out a clients serviceability at roughly 2% higher than the current interest rate.

I atttended a breakfast on Friday for the Economic Outlook for 2010.

These things seem clear:

1- Interest Rates will rise to between 7.5% - 7.9% (I still say it will stay under 8!) and fast, as RBA tries to get a grip on the rate of inflation.
2- Australia IS in the middle of a Population Boom

3- There is a lack of housing suppl. (Focus on NSW)

4- RENTS WILL INCREASE

5- There are many FHOB who did not enter the market and are still out there. There will NOT be a housing crash when the full FHOG ends as Investors will pick up the slack as Governement tries to push new housing and investment. I will be watching closely to see how our State Gvnt tries to implement this.

6. Unemployment has not been as bad as expected (or the media tried to claim)

7.Consumer Confidence is strong.

8. Business Confidence has increased in the past three months.

It is very evident that our economy is in recovery.

We should be happy Interest Rates are rising and look forward to some nice growth in our properties.

Regards JO

You forgot the following:

9. Ever increasing number of disappointed, frustrated and depressed home buyers who still predict a housing price crash.

 

[kotim]

First home buyers accross the board represent many different financial groups, but the majority will be in the lower to average income brackets without a doubt. As in larger capital type places house prices did not go down much. Now in Brisbane for eg where we are talking median house price of 450 grand, if we call it a loan for say 300 grand which is getting down tot he average first home owners area for loans the idfference is 1800 a month compared to about 2300 a month if we allow interest rates to go from 5.25% to 8% which is around about where the reserve bank thinks is a neutral area, then we have a huge difference in repayments.

It is irrelevent if the property price goes up because if you sell then generally most will buy again in the same market. Very few will genuinely be smart enough or lucky enough to sell near the peak and waite for a decline before they buy again.

What is trully interesting is that if we are to believe the figures provided then we will have a chronic undersupply of accomodation becasue it is not financial for developers to develop. Ultimatley the gov't would have to step in with some large incentives for investers to get involved as the go'vt can't afford to build the houses themselves.

Me I personally don't buy the chronic undersupply. It just means more people will share, or live at home with mum and dad etc.

The banks are going to increase their margins on loans so they WILL increase the rates at some point more than what the RBA does.

Its not all doom and gloom, but people don't have the money to pay the large prices relative to incomes now.

Have a look at the share market, nigh on none of the financial gurus for the governemnt or in corporations in their wildest dreams imagineda 50% fall in the market etc, yet it happened, so the same can happen with property maybe not tot he same percentage but none the less a drop of quite some size.

Now why don't you ask the comm bank and westpac etc how much exposure direct or indirect they have to the commercial property market in the good old USA. I guarantee you that they will not tell you anywhere near the correct figure. Personally I don't want to see people go under left right and centre, but it certainly is possible.


At the end of the day we play our own hand and we see what happens.

 

[Ausprop]

Bill Evans:

"We see no reason from this SoMP to change our view that there will be another 25 basis point rate hike in December, with a view to the cash rate peaking around 4.5 per cent around mid-2010, to be followed by an extended pause as households and housing prove to be sensitive to even this gradual tightening. "

http://www.businessspectator.com.au...-the-up-pd20091106-XJ8T5?OpenDocument&src=sph

 

[economist]

not bad but they left a bit out

to also add,

Banks work out a clients serviceability at roughly 2% higher than the current interest rate.

I attended a breakfast on Friday for the Economic Outlook for 2010.

These things seem clear:

1- Interest Rates will rise to between 7.5% - 7.9% (I still say it will stay under 8!) and fast, as RBA tries to get a grip on the rate of inflation.

2- Australia IS in the middle of a Population Boom

3- There is a lack of housing supply. (Focus on NSW)

4- RENTS WILL INCREASE

5- There are many FHOB who did not enter the market and are still out there. There will NOT be a housing crash when the full FHOG ends as Investors will pick up the slack as Governement tries to push new housing and investment. I will be watching closely to see how our State Gvnt tries to implement this.

6. Unemployment has not been as bad as expected (or the media tried to claim.)

7.Consumer Confidence is strong.

8. Business Confidence has increased in the past three months.

It is very evident that our economy is in recovery.

We should be happy Interest Rates are rising and look forward to some nice growth in our properties.

Regards JO

Interesting read Jo.

I fully concur with points 1,2 (with a rider see below) and 4. They left a few interesting bits out (not surprisingly). The first point is not disputed anywhere in the economic discussions I am aware of except by some dark despots with conspiracy tattooed on their foreheads.

Point 2 is well taken however any excitement in population growth must be tempered whilst the demographic breakdown is analysed. There may well be a case for an increase in housing but it is certainly not a given.

I am yet to see evidence of point 3 that has a sound methodology, which is disappointing.

Point 5 is very interesting. I am surprised as any move in this area would generally involve tax and the biggest name in tax at the moment is Henry, and his background suggests otherwise. I could be wrong though.

Point 6 is hardly worth discussing as the rule changes over the last 15 years in this area make any comparison of statistics a nonsense as they have completely distorted the time series.

One of the bits they left out which will pressure the mortgage rate is the lack of competition. The government guarantee has almost dried up funding outside of the big 4 banks. This lack of funding means the big 4 have less competitors to match price on.

Following on from that is the funding source. As Australians don’t save enough the banks had to source funds for the housing boom from overseas. This continues today and will do until we start saving again. Which is kind of difficult if you are paying for a large mortgage. You may have heard the banks advertising for deposits with rises recently in deposit rates, this is the first moves in this area. It is expected Henry will ease pressure on tax in this area as well. The guys that control this money overseas don’t quite see our real estate market as we do with a bright red cherry on top. In fact the scoundrels are asking for higher yields on their money due to the perceived risks. In addition the world is a tad short on funds so competition for these funds is also increasing, ergo higher yields.

The last 2 paragraphs above are 2 areas outside of the official cash rate (OCR) where we will see pressure on mortgage rates.

The OCR should increase at around 1% a year up to 5.5%. However mortgage rates will increase above the OCR increases due to the reasons outlined above.

Mike

 

[Ausprop]

The first point is not disputed anywhere in the economic discussions I am aware of except by some dark despots with conspiracy tattooed on their foreheads.

the chief economist for westpac bank disputes it

 

[economist]

westpac

the chief economist for westpac bank disputes it

mmm..If I can expand a little. He disputes that with an increasing money supply inflation is a risk? (I would find that hard to believe but then again looking at WBC balance sheet maybe not) or is it the level of interest rates he disputes?

Mike

 

[Ausprop]

the later. I re-read the article. nothing much specific there. I don't subscribe to the theory but to defy such an economist when I am a mere mortal is a big call.

I think really it's to hard to see where this will all go. the forces are so huge and so unpredictable that anything could happen. the size of this resources mega-boom is so huge that it could see a wage and price explosion in this country. the dollar could go nuts. manufacturing could be killed which will see resources freed up for more productive areas. Alternatively, if the banks keep refusing to play banks then the money multiplier and the velocity of money will remain at a trickle. what if there is a new terrorist attack and there is a flight back to safety? what of the US ability to continue to pay its way? peak oil, when will this become news again?

Many opposing forces!

 

[JulieW]

Agree entirely AusProp. The forces at work are so immense and so unpredictable that we're all in the lap of the gods waiting to see how it turns out. I can see scenarios with 17 percent IRs, scenarios with 50% price crashes, China bursting, America becoming like Zimbabwe, etc etc, and also the lucky country remaining lucky and everything being just hunky dory.

I think the thing to do is to allow for good and bad and prepare for a reasonable swing each way depending on how pessimistic or optimistic you are. Whether than means a big barrel of rice in your bunker and 100k in sovereigns to bribe the militia, or rice for the chooks and sovereigns to admire until you travel the world it's all the same. Whether the cups half full or half empty, you'll still have a half a cup.

 

[Aaron Sice]

\Whether the cups half full or half empty, you'll still have a half a cup.

LOVE IT! bugger the psychology of it all - half a cup of somethign is better than a full cup o' nuttin'!