# Will rates rise?



## Investor82 (27 February 2010)

Cmon - cards on the table. Who thinks the rates will rise on Tuesday? 

I am hoping they wont, purely from a selfish point of view. But regardless if they dont raise them on Tuesday they will in April. 

Im going with no.


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## nunthewiser (27 February 2010)

yes


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## Tysonboss1 (27 February 2010)

I think we will be trending upwards for some time yet, how ever i think we may pause here for a few more months.

But you know what, when it comes to picking short term movements I am terrible, So don't listen to a thing I say.


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## Naked shorts (27 February 2010)

Most of the news releases in Australia recently have been better then expected, so I'm going with yes.


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## Knobby22 (27 February 2010)

The best way is to look at what the economists say. It will be the opposite.


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## So_Cynical (27 February 2010)

Yes 0.25


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## boofhead (27 February 2010)

For personal reasons I hope yes, 0.25. I don't have borrowings. Markets rates follow similar movements. Hybrids are my best performing holdings so far.


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## ROE (27 February 2010)

Another couple percent and we see who has been swimming naked


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## Tink (27 February 2010)

Yep I think they will


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## Bill M (27 February 2010)

Investor82 said:


> Cmon - cards on the table. Who thinks the rates will rise on Tuesday?
> 
> I am hoping they wont, purely from a selfish point of view. But regardless if they dont raise them on Tuesday they will in April.
> 
> Im going with no.




I think they will and purely from a selfish point of view I hope they do as I am a fixed interest securities investor too.


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## drsmith (27 February 2010)

Don't raise rates enough and we have a bubble economy.

Raise them too much and the economy is crushed.

The critical question is whether their's a middle ground.


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## Dracuu (28 February 2010)

I have a strong feeling the RBA will put interest rates down within the next few months. I can't see them going up any time soon.


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## Julia (28 February 2010)

Dracuu said:


> I have a strong feeling the RBA will put interest rates down within the next few months. I can't see them going up any time soon.




Really?  Perhaps you might explain the reasons behind such a suggestion?


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## jbocker (1 March 2010)

No one picked the 0% increase last month. Reckon 0.25 is a sure thing, but who is to say the banks wont add a little to it as well.

Being an election year Krudd might try to put a foot on Stevens neck after this month.


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## Timmy (1 March 2010)

Suitcase number 0.25 please Andrew.

(I'm going with the peloton this month.  Up by 0.25%.)


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## Investor82 (2 March 2010)

http://au.news.yahoo.com/thewest/a/-/newshome/6874714/interest-rates-up-again/

They screw me again.


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## nunthewiser (2 March 2010)

Did i win a prize ?


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## Timmy (2 March 2010)

nunthewiser said:


> Did i win a prize ?




After last month's effort you and I have some ground to make up first.


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## nulla nulla (2 March 2010)

The interest rate rises/falls are supposed to be based on the basket of goodies that determines inflation. Not the bleeding rises in property prices. This increase, on the basis of trying to reign in housing price increases, is just another example of a regulatory body loosing sight of it's charter and stepping into areas it should keep the fark out off. 
The people this will impact on most are those that already have mortgages. This will reduce the amount of money circulating within the economy (at a time the economy needs stimulus), will impact on new building projects and will have a negative impact on the economy going forward (where the inflation rate does not warrant it).
At this point I begin to wonder if the Reserve Bank feels it has an obligation to take over where John Howard left off.


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## satanoperca (2 March 2010)

Nulla Nulla,

Why aren't rents and house price increases included in the basket of goodies?

How does high house prices help greater society?



> This will reduce the amount of money circulating within the economy




Doesn't this also preclude the fact that high house prices lockup capital anyway.

What do you want, historically low IR's forever?

Don't see ya complaining that house prices went up >10% last year. Use some of you new found equity if things get tough.

IR's to the roof, go savers.

Cheers


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## Calliope (2 March 2010)

nulla nulla said:


> The people this will impact on most are those that already have mortgages.




I have no sympathy to waste on people who took out mortgages, without taking into account that as the economy improves interest rates will rise. Rates are still historically low. Those whining about the banks should have done their homework before taking out the loans, on minimal deposits.


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## Buckfont (2 March 2010)

Calliope said:


> I have no sympathy to waste on people who took out mortgages, without taking into account that as the economy improves interest rates will rise. Rates are still historically low. Those whining about the banks should have done their homework before taking out the loans, on minimal deposits.




People are either desperate or stupid and I`d go with the former, as the idealism that one has to have a mansion or a snappy appartment to fit in with the norm.

I may be old fashioned, but even in my daughters case who is building a new home,it is ridiculously oversize, with a bathroom as large as my bedroom



I feel for those that are in her position and I hope when at todays new cash rate of 4% they never have to revisit the 15-17% of the Keating days. They have no idea how well off they really are, and how well they could be sewing the seeds of future financial prosperity if they could go down a few extra rungs on the ladder and made a sacrifice or two.

Even another 2% rate rise will pummell most young couples especially one with kiddies with  both parents working.


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## noirua (2 March 2010)

I always think that all these rate movements are a case of knee jerk reactions. If the rate falls below 2% or above 4% then the Government, who's job it is to run the country, have basically 'cocked it up'. 
Australia needs quite rapid growth, imho, of between 6% and 8% for many years to come. After all, 'Rudd & Co' want rapid population growth and more people inland, 'not all dotted along the coast'. Rudd & Co want people working not surfing.


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## Investor82 (2 March 2010)

Buckfont said:


> They have no idea how well off they really are, and how well they could be sewing the seeds of future financial prosperity if they could go down a few extra rungs on the ladder and made a sacrifice or two.




I think I fit into the category of "sacrafice" having never lived in a property which I own. Often sharing a run down appartment or house with friends (even at times living in my car at the beach - despite having more than one property). I have never paid more that $150/week in rent, have never had a car loan, and clear all my credit card debt each month - plus sometimes working 2 jobs. But I wittness many friends and family members doing the same as your daughter buying/building houses they cant really afford because the alternative is 'below' them. 
Unfortunatly though I still have large amounts of debt. The interest rate rises affect my lifestyle and (as long as they dont jump too high) I will continue to survive.  
Maybe rather than fitting into the "stupid or desperate" category I sit in the "greedy investor" category. 

Everybody has to start somewhere and unfortunatly not many start with a lump sum, so often debt is the only option...


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## Soft Dough (2 March 2010)

nulla nulla said:


> The interest rate rises/falls are supposed to be based on the basket of goodies that determines inflation. Not the bleeding rises in property prices. This increase, on the basis of trying to reign in housing price increases, is just another example of a regulatory body loosing sight of it's charter and stepping into areas it should keep the fark out off.
> The people this will impact on most are those that already have mortgages. This will reduce the amount of money circulating within the economy (at a time the economy needs stimulus), will impact on new building projects and will have a negative impact on the economy going forward (where the inflation rate does not warrant it).
> At this point I begin to wonder if the Reserve Bank feels it has an obligation to take over where John Howard left off.




Perhaps it is a reaction to the government intervening in the property market, when they should have left it to market forces..

A solution to any cashflow problem is to draw down some of the increased equity derived by the governments First home vendors splurge and use this money to pay the extra interest.

I mean there is no reason to whine and moan when you have to pay a few dollars extra per month because the government, through reckless incentives increased the value of your property by 10% is there.


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## Julia (2 March 2010)

Calliope said:


> I have no sympathy to waste on people who took out mortgages, without taking into account that as the economy improves interest rates will rise. Rates are still historically low. Those whining about the banks should have done their homework before taking out the loans, on minimal deposits.



The government also contributed to first home buyers being in this situation with the increase in the grant.  It has essentially been Australia's version of the US's subprime market.



noirua said:


> I always think that all these rate movements are a case of knee jerk reactions. If the rate falls below 2% or above 4% then the Government, who's job it is to run the country, have basically 'cocked it up'.
> Australia needs quite rapid growth, imho, of between 6% and 8% for many years to come. After all, 'Rudd & Co' want rapid population growth and more people inland, 'not all dotted along the coast'. Rudd & Co want people working not surfing.



The Reserve Bank has in fact been 'fixing' the inflation caused by the government's various stimulus packages.
I can't help wondering what would have happened if the RB or the government had done nothing and the whole situation was simply left to market forces.  At least we would not have had first an artificially stimulated economy and then (via the RB) a need to put the brakes on the results of that stimulation.  All just seems a bit silly, really.  
But perhaps I just don't get it.




Investor82 said:


> I think I fit into the category of "sacrafice" having never lived in a property which I own. Often sharing a run down appartment or house with friends (even at times living in my car at the beach - despite having more than one property). I have never paid more that $150/week in rent, have never had a car loan, and clear all my credit card debt each month - plus sometimes working 2 jobs. But I wittness many friends and family members doing the same as your daughter buying/building houses they cant really afford because the alternative is 'below' them.
> Unfortunatly though I still have large amounts of debt. The interest rate rises affect my lifestyle and (as long as they dont jump too high) I will continue to survive.
> Maybe rather than fitting into the "stupid or desperate" category I sit in the "greedy investor" category.
> 
> Everybody has to start somewhere and unfortunatly not many start with a lump sum, so often debt is the only option...



I don't mean to be asking intrusive questions, but if you have lived so frugally thus far and always clear your credit card debt, how is it that you have 'large amounts of debt"?


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## noirua (3 March 2010)

Julia said:


> The Reserve Bank has in fact been 'fixing' the inflation caused by the government's various stimulus packages.
> I can't help wondering what would have happened if the RB or the government had done nothing and the whole situation was simply left to market forces.  At least we would not have had first an artificially stimulated economy and then (via the RB) a need to put the brakes on the results of that stimulation.  All just seems a bit silly, really.
> But perhaps I just don't get it.




I've always preferred the idea of increasing taxation when growth looks to be getting too strong or windfall taxes. This helps build a big reserve for the bad times or just reduce the peak and troughs to aberations.


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## Tink (3 March 2010)

Buckfont said:


> People are either desperate or stupid and I`d go with the former, as the idealism that one has to have a mansion or a snappy appartment to fit in with the norm.
> 
> I may be old fashioned, but even in my daughters case who is building a new home,it is ridiculously oversize, with a bathroom as large as my bedroom
> 
> ...




Yep Buckfont, but some of these new estates have covenants where they have to build their house a certain size

I bought my first house with the 17% - I dont think it will ever get to that again.


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## nulla nulla (3 March 2010)

You would need to talk to the Reserve Bank to rationalise what is in the basket of goodies and what isn't. 
House prices are determined by supply and demand. If the Government thinks prices are too high they should consider opening up more land for developers on the basis that a percentage of the developement will have prices capped for sale to genuine first home buyers etc etc.
Owning an expensive house does not necessarily mean capital is locked up for ever. Most home owners use the capital in their properties as security to raise investment funds to acquire other properties of business investments or, horror of horros, to trade the share market.
I suspect your argument is subjective or biased as you have previously stated you sold at the top of the boom and now rent at half the cost you previously paid into the sinking fund. Your problem will come when you decide to re-enter the property market and you find property value have outpaced the short term gain you made from selling at the peak and renting.


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## satanoperca (3 March 2010)

nulla nulla said:


> Your problem will come when you decide to re-enter the property market and you find property value have outpaced the short term gain you made from selling at the peak and renting.




Of cause this is based on the assumption that property is not in a bubble and will continue on it uphill charge for the coming years. That the global issue of massive indebtness has passed and everything is back to normal.

If this is your assumption then why complain about a small interest rate rise.

Cheers


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## Tysonboss1 (3 March 2010)

Julia said:


> I don't mean to be asking intrusive questions, but if you have lived so frugally thus far and always clear your credit card debt, how is it that you have 'large amounts of debt"?




I think he is talking about investment debt,

I am in the same boat as him, I am turning 28 in 7 days, have always lived very frugally and have $0 personal debt, but have over $1M in investment debt (Investment home loans,Business loans, margin loans etc etc) although it is positively geared and on a comfortable LVR.

Leverage is a great tool that works 99 times out of 100, how ever when it does go wrong it is game over. So any one that does find themselves building a large portfolio funded by debt, don't forget to have a plan on how you are going to clear this debt.

A wise man said you only have to have your head under water for 10mins and it's game over, you can have you head under water for 30 seconds every day and be ok, But if a perfect storm comes (12% interest) and you haven't prepared yourself, you will wipe out your entire capital base.

I don't believe in having interest only loans forever, you should always have the bulk of your debt in a reducing cycle. Never rely on the kindness of banks, dont over leverage and if you do, make sure it is sort term to take advantage of a lull in the market and have a plan to steadily reduce the leverage i the following years.


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## Investor82 (3 March 2010)

Tysonboss1 said:


> I think he is talking about investment debt




Yeah - it is investment debt. I am 27 (28 in June). I am implimenting a 10 year plan (I am 3 years in) and if everything goes to plan I will be in a possition to retire at age 35. Thats the plan anyway. 
But every 0.25%  is about $500/month to me. I have about 2% left in my capability but in 12 months, I will have completed a small project which will ease the pressure (again - all going to plan - which admitedly its not right now). 

I earn USD so I am really hoping for an AUD crash anytime soon. Since Jan last year my income has dropped 30% and I have had over 1% increase in interest rates. It is pretty close to a "perfect storm" for me, a couple more waves could sink the boat, but a change of wind direction will see me sailing safely to the sunset 

I am probably pushing my luck a little bit, but I am pretty ambitious so thats always bound to happen. 

The reason I am researching share trading (and hence visit this site) is Im seeking ways to improve my cashflow. My idea is to jump into the market in probably about 12months time.


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## Investor82 (3 March 2010)

Tysonboss1 said:


> I don't believe in having interest only loans forever, you should always have the bulk of your debt in a reducing cycle.




Admitedly this is something which I have failed to do over the last 3-4 years, and in hindsite has been a mistake. Which I will correct asap. I took some advise when I was young, which said that money being used for debt reduction can be better used elsewhere. I disagree with that now I know more. 



Tysonboss1 said:


> Never rely on the kindness of banks, dont over leverage and if you do, make sure it is sort term to take advantage of a lull in the market and have a plan to steadily reduce the leverage i the following years.



I am probably over leveraged atm, and will be for the next 12months until this project is completed. Once it is finished I will have the option to either increase income (rent) or reduce debt (property sale). My decision will depend on conditions at the time.


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## Timmy (3 March 2010)

Investor82 said:


> I am implimenting a 10 year plan (I am 3 years in) and if everything goes to plan I will be in a possition to retire at age 35.




Good on you I82.

Maybe checking out some of the info around on hedging your FX exposure could be helpful to reducing your risks?


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## Investor82 (3 March 2010)

I know the basics of FX but will look into it, see if there is anything I can do to reduce the exposure. 
The difficulty is in the fact that my income is relatively low figures when looked at from a traders position. 

Thanks for the heads up though.


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## noirua (6 March 2010)

The Reserve Bank is just that 'Reserved'. Come on now let's have a boom with growth rates up to China's 8% - 10% target. Fair enough, that equals higher risk, but Australia really need to stamp its authority on the rest of the World and not look like a puppet of China.


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## Julia (6 March 2010)

Back to the recent rates rise:  two banks announced increase in loan rates the same day the RB raised the cash rate and the other two followed (I think) the following day.

Now almost a week later, and there is no change in deposit rates.
Are we surprised?  I don't think so.


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## GumbyLearner (6 March 2010)

Yes.

When? :dunno:

How much? :dunno:

I'm really happy with rates going up though. Fantastic news for savers.


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## Julia (6 March 2010)

GumbyLearner said:


> Yes.
> 
> When? :dunno:
> 
> ...



My point was that they haven't gone up with the last RB rise!


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## GumbyLearner (6 March 2010)

Julia said:


> My point was that they haven't gone up with the last RB rise!




You could be mistaken Julia but I was addressing the original question started by the thread initiator.


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## iced earth (7 March 2010)

March 6 (Bloomberg) -- The unemployment rate in the U.S. held at 9.7 percent in February and employers cut fewer jobs than anticipated, indicating improvement in the labor market even as East Coast blizzards forced temporary closings of some businesses.

Payrolls dropped by 36,000 last month after a revised 26,000 decrease in January, a Labor Department report showed yesterday in Washington. The jobless rate, which has not increased since October, held at 9.7 percent, even as more people entered the workforce.

Stocks and the dollar rallied while Treasuries fell as investors reckoned the economy would have added jobs were it not for seasonal snowfall records in cities including Baltimore and Philadelphia. The U.S. needs employment growth to sustain a recovery from a recession that has cost 8.4 million jobs since December 2007.

“The weather effects were enough to transform what would’ve been a positive into a negative,” said David Resler, chief economist at Nomura Securities International Inc. in New York, referring to payrolls. “Job growth is happening as we speak. Companies are seeing a stabilization of demand.”

The Standard & Poor’s 500 Index rose 1.4 percent to close at 1,138.7 in New York. The dollar strengthened 1.4 percent to 90.3 yen from 89.02 the previous day. The yield on the 10-year Treasury note rose to 3.68 percent at 4:24 p.m. in New York from 3.60 percent late the prior day.

Payrolls were forecast to decrease by 68,000, according to the median estimate of 82 economists surveyed by Bloomberg News. The jobless rate was projected to increase to 9.8 percent.


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## jbocker (7 March 2010)

Julia said:


> Back to the recent rates rise:  two banks announced increase in loan rates the same day the RB raised the cash rate and the other two followed (I think) the following day.
> 
> Now almost a week later, and there is no change in deposit rates.
> Are we surprised?  I don't think so.




Went to a bank Friday 5th to roll over a term deposit and found Bendigo bank actually dropped their rates for the short terms up to 6months!!!! Not sure about longer terms other than their long term 5 years were increased I believe. Go figure.


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## Go Nuke (7 March 2010)

Tink said:


> Yep Buckfont, but some of these new estates have covenants where they have to build their house a certain size
> 
> I bought my first house with the 17% - I dont think it will ever get to that again.




Yes, where we are building we have to have a min 220sq metre house.
Sucks but what can we do??
We would have prefered to build something much smaller with bigger backyard.
Hate covenants! We pay all this money for a block of dirt that we can't do what we like with.

BS


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