Hi All,
recently came across an interview with Rod Cornish, head of property research at Macquarie Bank.
When asked “what is your prediction for interest rates and what effect will it have? he responded as follows:
We think it will be flat for the rest of this year and then rise moderately next year. Probably about February there’ll be a quarter per cent rise and there’s a possibility of another quarter per cent rise about April. But it’s still pretty moderate in the scheme of things. I think it will impact on confidence but typically what drives crashes are people forced to sell and quarter or half a per cent is not going to create many “for sales”.Hope this is of some help.
Regards,
Helenelika,
From what I’ve read, it is thought that IR’s will rise, by probably .25% in December. They won’t rise during an election- the RB wouldn’t mess with people’s heads like that- or mess with the major political parties.
Basically, the economy is healthy, with over 4% growth, and spending is still high- due, amongst other things, to recent govt handouts to individuals, so IR’s will probably have to rise to slow down spending and debt.
IR rises are like the RE market- they rise and fall. When we read how new building is booming, or how much debt aussies are in, then we ought to expect a rise. Then of course, IR’s will rise, we will slow down our purchasing, everyone will panic, and see it as some form of govt mismanagement… but really, IR management is part of the cycle.
I think what people tend to forget is that the RB is completely independent of the govt, and they check out the overall picture, and they’ll do what is politically unpopular is they feel like they need to slow down the economy.
If IR’s do rise, it will allow, for example, first home buyers to afford a house, meaning there’ll still be markets of buyers- fewer investors, more FHO’s… comme ci, comme ca.
kay henry
Kay..
What do you mean by If IR’s do rise, it will allow, for example, first home buyers to afford a house, meaning there’ll still be markets of buyers- fewer investors, more FHO’s… comme ci, comme ca.
I would’ve thought any rise would subdue the market slightly including FHOG buyers?
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorRedwing,
Yeah, I thought about that as soon as I wrote it and couldn’t be bothered to do a please explain- hehe.
This is how I see the link… the only way for the market to really dampen- in a significant way- is for the RB to intervene. So I think an IR rise will really chill the RE market, and hence, housres will become more affordable. A small rise in IR’s will scare speculative buyers, and others will probably wait and see. But if the market falls in price by, say 20% (I could see that happening), this will allow FHO’s to enter the market. They will still be operating under a climate of historically low IR’s, and it will be their chance to get their foot in the door.
I am thinking of the sydney market here, so my response has that skew. It is almost impossible for many average people to save a deposit for a sydney place… but we have still large migration, and the FHOG is an incentive to motivate FHO’s. But I do think prices will have to really fall for FHO’s to be able to afford a home. They are still looking at having to get a deposit of up to 100k to be able to enter the market in sydney, and that’s out of many people’s reach. A value decline of around 20% would allow them entry.
kay henry
Hi Helen,
The current interest rates are a little bit deceptive given the rate (in percentage terms) is historically low – the flip side to this is loan repayments (affordability index?) are at an all time high (or should that be low).
As such any upwards movements will create as much, if not more, stress on borrowers than when rates were 18% in the late eighties early nineties. I believe this is one of the reasons five year fixed rates are still on the low side being, in the main, generally close to the standard variable rate. There is not a lot of room to move before people should start closing the wallet/purse.
However there are a couple of complicating factors that do come into play.
Higher fuel prices do affect a greater percentage of the population and therefore the prices currently being experienced do create a drying up effect of discretionary spending $.
The other ‘curve ball’ is the different lending climate that exists now than it did in the late eighties and early nineties – that is the willingness with which lenders allow customers to use their equity as an ‘income stream’.
But, all things being said, property is a long term investment and quality property in quality locations will still be a good investment.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Go back and have a look at some of your old magazines such as ‘your mortgage’ etc. Look for old predictions and see how many get it right. I don’t think it is very many!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Spot on Terry.
Most analysts can’t forecast what the RBA will doing one or two months let alone 1/2, 1, 5 years!!!
That’s why I regard those BIS Shrapnel long term forecasts as having the same integrity as the “Little Jonnie Election Promises”.
Cheers
Stu
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