Am currently a NZ investor on property and looking at the history the interest has only fallen but never gone up (trend change was minor). we have always been told – this has been the history low and it can only go up from here and the reality was the very opposite. Currently rest of the world has Interest at its lowest hence why we keep worrying about interest rate rise when we are (NZ & Aus) already lot higher than many other countries (Europe, Canada/USA)?
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This topic was modified 8 years, 8 months ago by
Sunvi Ahsan.
Hi Sunvi,
Welcome to the site.
Very complicated question you have there. Short answer is, interest rate will definitely go up, even though we currently have higher interest rates. In fact, the level of interest rate is not relevant factor in considering whether it is going up or down.
The relevant factors are macro economics and Global economics particularly the economics of our trading partners.Higher interest only means that should the RBA need to stimulate the economy, it has more ‘ammunition’ compared to other countries.
Anyway, long story short, interest rate will go up. The rate history does show double digit interest rates – just go further back from the period you looked at.
Lemme know if you need further analysis / persuasive arguments… but I’d trust the economists and the wise people who say interest rate will go up.
Cheers,
Cattleya
Here to learn the ropes of property investing and hopefully help others along the way.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
While the official cash rate may be pushed down, the market rates that you can actually source funding and lend at could be much different. Hence why ANZ actively marketed that they ‘decoupled’ their rate decisions from the RBA a while back.
If the economic climate got worse, jobs started being lost and mortgages defaulted then the relative risk rating for mortgages in Australia would be upgraded (i.e. credit rating downgrade). As a result finding sources of funding to borrow to this market would be more difficult unless you raised the amount of return they were getting (i.e. risk vs reward). No different to how lending from second tier sources and other P2P lenders have higher rates of interest now, just on a larger scale. The RBA could be doing all it can to lower rates, but if the market doesn’t believe that we can pay back our loans, the interest rates would rise regardless.
The question is, what would cause a significant downgrade of our credit rating to such a point that creditors (those with the real money) would be unwilling to lend to Australia? Is that scenario likely to play out in the near future?
Point number 3 of Steve’s article 3 Dumbest Things Property Owners do in a Hot Market, discusses just this.
And I totally agree. ;)
Cheers,
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
I think RBA will set it down again sometimes this year, because recently China has decrease its Interest Rate.
http://www.bbc.com/news/uk-34052618So I guess it would be followed by Australia sometimes this year with the consequence of falling AUD$ even more :-|
If US Feds increase their IR, then we are even sooner to lower down the IR even further making Australian Property price even better to the International Investors, see this news: http://www.smh.com.au/comment/all-bubbles-burst-first-china-later-australia-20150826-gj8dpe.html
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This topic was modified 8 years, 8 months ago by
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