Interest rates?

[ttc]

I'm not into financial stuff so I'm a bit confused..

Housing has slumped, petrol prices are ridiculous.. and they want to put interest rates up..

How does that help? People are struggling already, isn't that hitting them while they are down?

Can someone pls explain in english how making ppl pay more for their mortgage when everything else is so expensive helps the economy?

[Glen]

At present the RBA's decision will be based solely on their expectation re inflation rates over the next period or so. If they think inflation will be an issue they'll bump rates up a quarter to slow demand.

We've had two consecutive periods where consumer confidence has been positive so it would appear fuel prices aren't as much of a concern as most would think.

For what it's worth I don't think it's great timing, but you've got a budget just about to come out which will probably include some tax cuts so rates will either go up now or in the near future I would think.

Bank Bill rates have lifted in the last week so the banks are pricing it in already anyway.

An increase in rates will likely also bring about a slight improvement in the AUD which will bring imported prices down as well but will give our farmers grief. And on and on it goes and where it stops...........?

[Smitty]

I'm not into financial stuff so I'm a bit confused..

Housing has slumped, petrol prices are ridiculous.. and they want to put interest rates up..

How does that help? People are struggling already, isn't that hitting them while they are down?

Can someone pls explain in english how making ppl pay more for their mortgage when everything else is so expensive helps the economy?

as Glen sez the whole thing is based on keeping inflation in check
and the fuel price increases means everything will be more expensive...
farm produce will cost more to get to the supermarket, clothing ( coming from China)
will cost more to get off the wharf into the shops
so the whole exercise is aimed at dampening demand
but
can of course be counterproductive...business puts its prices up to cover the increased cost of funds
(money used to make a business run)
and so on
..and so on

mind you.....
the value of the pacific peso (aka aussie dollar) will improve as global investors buy it
(to invest here and get higher interest for their money)
and so the cost of imports (generally in US dollars) will go down
so people buy more
and away we go again...with interest rates being looked at again
in 2 months time and put up again

just one vicious circle

cheers

[mrmina]

well thats why i went for fixed for 3 years at 6.55%.

not a bad deal and no penalties for paying extra on the loan.

also i'm getting a company car.

so i guess its worked out well.

[Smitty]

also i'm getting a company car.

I am having a little trouble
working out what that has to do with.... interest rates

[mrmina]

also i'm getting a company car.

I am having a little trouble
working out what that has to do with.... interest rates

cos fuel prices are going up, so it wont affect my budget

[diesel]

interest rates have been phenomenally low for a long time now.
the housing boom is starting to come to a halt. and i stress the word starting. people have been generally been spending big for some time now. the RBA needs to stop the spending so we don't enter a period of spiralling inflation which will make things incredibly hard in the long run.

also, even if the cash rate goes up 25 points, don't be certain all lenders will increase their rates accordingly.
many large banks, increased their rates that little bit extra with the last cash rate rise in order to absorb the next rise which was expected 6 months ago but never came.

[diesel]

oh and mina,

i hope you're applying a reference rate to your loan so that your repayments increase gradually, or you're gonna get one hell of a shock when you come out of your fixed period.

[Smitty]

interest rates have been phenomenally low for a long time now.
:

....not really
here in Oz the rates never got into the low 4s
but
in Japan and the yewessofhay..they reached something like
ZERO point Two Five percent (0.25%)
now that is low and they are only now rising (as the global economy expands
and needs money)

and its not long ago, you could buy a car in the US on ZERO interest
(coz the base rate set by the Feds there was 0.20%)


cheers

[Glen]

Right on Smitty. Compared to the rest of the world we have had ridiculously high interest rates for quite some time now, but we've had a long period with a strong economy so if our rates weren't where they were presumably we would have all gone nuts and bought everything we could.

An interesting stat is household interest expense as a percentage of income. At the momement it is what it was in the mid to late 80's when rates were 17.5%. This means our level of household debt is massive compared to then. A minor move in interest rates is now a huge lever on our spending patterns.

[Redback]

when we bought our first house my boss said to lock the interest rate at 15.25% for 3 years, lucky we did as it went up to over 17.5% ahh the good old eighties!!

[javaman]

An interesting stat is household interest expense as a percentage of income. At the momement it is what it was in the mid to late 80's when rates were 17.5%. This means our level of household debt is massive compared to then. A minor move in interest rates is now a huge lever on our spending patterns.

That's an interesting way to look at it... and I just found out what mine is ... no ZX10R for me for a loooong..looong time now

[Stereo]

Steph and I are looking at fixing for a lot longer than that.... if we can... we both suspect its going to go up a fair bit.... but we are going to get some advice first... have a mortgage broker coming around tonight...

[Glen]

Steph and I are looking at fixing for a lot longer than that.... if we can... we both suspect its going to go up a fair bit.... but we are going to get some advice first... have a mortgage broker coming around tonight...

Interestingly in the US you can apparently lock your mortgage rate in for the life of the loan. That'd at least give most poor buiggers some certainty.

[Felix]

I rent