Will Interest rates to nudge double digits in next 2 years?

If it is any comfort....I don't think so...why???

From early 2007 to mid 2008 rates went from something like 6.5% -6.8% to 9%....about 33%-38% increase in repayments.

Rates dropped to 5% from late 2008 to April 2009. Some drops were large as 1%!

From May 2009 to May 2010.....rates have risen from 5% to 7.2%....an increase of 44% to date in repayments....another 2 increases of 0.25% will take it 54%......

Based on this....I feel that rates will nudge about 8% ....can't see if go past this unless inflation gets out of control. Already things are slowing in property. If they do go past 8% it will be blood bath...as people default!

http://www.news.com.au/money/intere...ge-double-digits/story-e6frfmn0-1225866565157

I'm about planning to buy my 2nd IP but if interest hit another 2-3% in next 2 years then I would be in a deep mortgage stress... :eek: So should I or shouldn't I? :confused:
 
http://www.news.com.au/money/intere...ge-double-digits/story-e6frfmn0-1225866565157

I'm about planning to buy my 2nd IP but if interest hit another 2-3% in next 2 years then I would be in a deep mortgage stress... :eek: So should I or shouldn't I? :confused:

I think a lot of investors will be in the same boat if interest rates nudge double digits (I know I'll be feeling it).

But not buying for two years to see what interest rates will do is also risky. Its risky because you're forgoing the opportunity of buying your second IP which will likely experience some capital gain over the next two years.

At least you can, to some degree, mitigate the risks of increasing interest rates. You could buy an IP with a higher yield or carry out some cosmetic renos to increase the rent (to cover the higher interest rates). Either way, factor a 3% increase into your calculations now, if you can still afford to keep it, then buy it.

Cheers,

Jamie
 
I can't see it happening as the average mortgage is much larger on the affordability scale it would send most people bankrupt, I THINKS ?
 
No one knows where ir's will be in two years as it's a dynamic market, the best nod you will get is to look at where the pros think it will be, ie 30 day money, the short end of the curve, bank accepted bills as traded on the SFE. Check out Futuresource.
 
you can get 8% fixed for 5 years with any lender in the country right now, why are we even discussing "what if they go to 10?" ?

If you're worried fix it. If you're not worried don't.

Interest rates are a bad reason to not buy something, when they're so easy to control.
 
Very unlikely.

It will only happen if inflation runs out of control like in the 1980s. However, most central banks around the world (especially the Reserve Bank) have a much better handle on monetary policy now and will be able to keep inflation in check.
 
Sorry to be a pessimist, but I think significant inflation is just about inevitable.
Just look at the billions (if not trillions) being pumped into economies around the world...
Marg
 
I actually think interest rates will start falling. The RBA has been way to aggressive and overshot the mark. Just looking at the financial troubles gripping Europe as well as the fact a lot of people I talk to in Australia seem to be struggling, It makes me think things are not quite as rosy as the RBA thinks.
 
Doubt it very much as things could well end up too fragile for those numbers but I would find a much better IP than that though b/c that's cutting it too fine right now in my book.
 
this never stopped them in the past ..

i think they will as inflation is becoming a problem .
Well put urbanprospector. Quote from todays Age saying rates will stay on hold for June:
With the economy picking up pace and inflation skating on the thin ice near to top of its target range, the likely pause in the RBA's schedule of rate rises may not last very long.

Borrowers have not been let off; they have just been given a stay of execution.
Link here for those interested:
http://www.theage.com.au/business/r...but-it-might-not-last-long-20100518-vaok.html
 
Yaaawwwnnnnn!!!!!.....Streetchhhhh!!!......same diatribe....nothing new....he keeps banging on about the wealthy suburbs going up further in Melbourne???
I am a bit disappointed that MY is now mostly about promoting his business which concentrates in inner Melbourne.

For the life of me I can't see the market going....up another 8%-10%.......particularly in Melbourne. If anything I would see a 5-10% correction in most suburbs of Melbourne.....this includes the outer suburbs ....but the correction here is more likely to be flatlining.

Also an interesting article which acutally argues the scarcity factor ..as to whether there is one in places like Armadale, Toorak, Windsor, South Yarra:

http://www.theaustralian.com.au/bus...e-growth-outlook/story-e6frg9gx-1225865673164

I guess time will tell who is right on this matter......

Ps ---And another commentary from the guy who is Head of Property Research at Macquarie Bank....

http://www.hotspotting.com.au/index.php?act=viewArticle&productId=2038

 
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Yaaawwwnnnnn!!!!!.....Streetchhhhh!!!......same diatribe....nothing new....he keeps banging on about the wealthy suburbs going up further in Melbourne???
I am a bit disappointed that MY is now mostly about promoting his business which concentrates in inner Melbourne.

For the life of me I can't see the market going....up another 8%-10%.......particularly in Melbourne. If anything I would see a 5-10% correction in most suburbs of Melbourne.....this includes the outer suburbs ....but the correction here is more likely to be flatlining.

Expensive suburbs are probably down by that already in my view. Just judging from the number of pass ins and deals not happening.

Regarding scarcity of course there is greater scarcity in inner suburbs, 20,000 "up market" properties isn't alot in a city of 4 million people.
 
Very unlikely.

It will only happen if inflation runs out of control like in the 1980s. However, most central banks around the world (especially the Reserve Bank) have a much better handle on monetary policy now and will be able to keep inflation in check.

yes much better handle on it :rolleyes: they changed the way they report it
 
http://www.news.com.au/money/intere...ge-double-digits/story-e6frfmn0-1225866565157

I'm about planning to buy my 2nd IP but if interest hit another 2-3% in next 2 years then I would be in a deep mortgage stress... :eek: So should I or shouldn't I? :confused:

Find a property with yields above or at the current interest rates with some depreciation benefits, whack down a bit of a deposit (in cash), and fix your loans for 5 years if it worries you and you'll be fine.


I can here people typing already; "You can't find yields above the current interest rates".....

They're right; THEY can't.
 
I don't agree with John Edwards on everything, but I think he lays out the reasons well for lower rates later this year.

Keep in mind if European problems get worse, or China cuts exports significantly, Aussie rates might go down, but banks may not have enough cash to lend (because they are heavily reliant on foreign borrowings). So even though there might be a pull back in house prices, you won't necessarily get a loan without a big deposit and stable income.

Personally I put the Probability of rates going above 8.5% in the next 5 years at less than 5%.

And here's a chart of what the professionals' predictions are for the Aussie cash rate for the last 18mths.... note May21, the latest prediction, allows for rates to decrease this year.

 
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