For last few weeks there has been a lot of speculation that the Reserve Bank may raise interest rates as early as November. Now the latest reports are saying that another rise could follow in December as it seeks to keep a lid on inflation.
Who’s else besides myself is anticipating the same thing, because I really think that this is more then likely to occur?
Yep its looking more and more likely that they will rise before the end of the year. We have had it pretty good for the past 12 months or so with the last rise I think in July last year. Not everyone is able to but one thing I tried to do(knowing they would come back up eventually) is keep my repayments the same each time the rates went down. Which means I am now paying $400 extra a month on my home loan but also when rates come up again there will be no need to increase my repayments till they reach over 8%(which hopefully won't happen anytime soon
)I work with a bunch of economists & they're all predicting at least one 0.25% rate rise this year, maybe two. It's all to do with inflation rising too fast apparently.
This may sound a bit selfish but i have faith that rates will not hit highs that will affect me. The % of my wage committed to loan repayments across all my properties is well below 20 %. With this in mind i imagine as they climb many others will feel the pain before i do and this should be enough to slow things/rates down befor they get to a point i feel the pain.15% rates will not sink me but i doubt we will see that with Australias current debt level.
I really don't believe rates will rise before xmas. Remember the bank's economists have a self interest in promoting interest hikes as it pushes people into fixed rates-great for the banks. Rates are definately going to rise but I believe it will be early next year. People will stop spending as soon as the first hike even if it's only 25 points, I can't see the Res. bank wanting that to happen prior to xmas. Also I still don't believe we have hit the bottom with unemployment even though we now know it won't be as high as originally thought. I could be wrong but the media and the bank's have a self interest in their scare tactics.
Hydra
I believe we will see further rates rises as the economy picks up. As the infrastructure stimulus packages start there will be a lot of money in the economy and possible over stimulation. The only way to slow the economy down will be to increase interest rates to stop consumer spending.
I believe we may see double digit interest rates within three years or so.
90 day bank bill rates have been found to be a good indicator of cash rate directions. @ 16/10/09, the rate is 3.91%, so a 50 basis point rise on the cash rate may not be out of the question in the near future.
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