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Did I say if ?
I did.
I did.
Interest rates - where are they heading?
- Thread starter BradK
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I still don't have a solid idea based on people's input on this thread: UP/DOWN/HOLD?
Based on historic data what does the evidence suggest will happen to interest rates should the markets head north or if they head south? There must be some data points that provide some form of clarity based on these 2 scenarios?
I would have thought that if the markets continue to head south, and people significantly decrease their borrowing, the lenders will want to drive revenue somehow - raising of the interest rates is certainly an easy way to partially achieve that goal.
Based on historic data what does the evidence suggest will happen to interest rates should the markets head north or if they head south? There must be some data points that provide some form of clarity based on these 2 scenarios?
I would have thought that if the markets continue to head south, and people significantly decrease their borrowing, the lenders will want to drive revenue somehow - raising of the interest rates is certainly an easy way to partially achieve that goal.
prawn_86
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I still don't have a solid idea based on people's input on this thread: UP/DOWN/HOLD?
Based on historic data what does the evidence suggest will happen to interest rates should the markets head north or if they head south? There must be some data points that provide some form of clarity based on these 2 scenarios?
I would have thought that if the markets continue to head south, and people significantly decrease their borrowing, the lenders will want to drive revenue somehow - raising of the interest rates is certainly an easy way to partially achieve that goal.
You are talking about bank interest rates, not the RBA rate - they are very different.
One is the means by which you (the borrower) get bent over and asked how hard you would like - guess which one of the 2 that is?
The other is supposed to be a form of monetary policy which has much more broader consequences than those of the banks.
The only reason why many people see the RBA rate and the Bank rate as being one in the same is that the Banks are always on the nose, and by shifting rates up its a wonderful political football. Esp. when independent of the RBA upping their rate.
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I wont even bother with what’s wrong with this statement, other than to say, I will place a $1 million bet on the table right now to say hell will freeze over if you think we will have RBA rates at or near 0%, in fact, I would almost go so far to say short of hell freezing over, I would put the same bet on that interests will go no lower!
Like to take the offer up joey?
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Depends if you are talking Target Rate, Effective rate or Real rate? Real rate is already 1.5%?
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The current RBA (Reserve Bank of Australia - sorry, not being a smartarse just making sure) REAL RATE is 1.5%?
Do I have this right?
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Err, I don't want people to start betting on what the rate hits (or arguing). My fundamental question is below and is straightforward:
If you have any data that suggests what rates will do over the longer term (eg trends), this can relate to: variable interest rates, Official cash rates, 90 Day, 180 day rates - I really don't mind, just curious on what the longer term trend could look like.
If you have any data that suggests what rates will do over the longer term (eg trends), this can relate to: variable interest rates, Official cash rates, 90 Day, 180 day rates - I really don't mind, just curious on what the longer term trend could look like.
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Re: Interest Rates Going Up???
As you can see I have also asked a question which was shifted into this thread as it existed before my question. So I guess thats why there appears to be 2 threads within the one. Might explain why it looks like your question is not matching the answer.
As you can see I have also asked a question which was shifted into this thread as it existed before my question. So I guess thats why there appears to be 2 threads within the one. Might explain why it looks like your question is not matching the answer.
It never ceases to amaze me the rubbish some of these analysts keep coming out with.
I have read this afternoon that JP Morgan are saying interest rates will go up 25bp next month.
Where do these hacks get this sort of rubbish from? Come on, you have got to be kidding me. Like all these funny-money outfits ramping something in the hope it might come true might just work in their favour, yet IR’s up next month?
Yeah right!!!
Anyone else think this is going to happen? Me, I have been saying it for about 2 months now, we won’t see another one before Jan 2010, with the faintest of chances Dec this yr, yet not banking on that one.
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I've pulled the variable interest rate data from the RBA site which goes back to 1959.
Some observations:
In most cases where there is a bear market (eg 12months or more) the interest rate trend was mostly up during the bear market. Even in the current bear market - the first 7 months of the decline saw higher interest rates.
This divergence can be seen on the red lines between the XAO and the variable interest rate line.
Not all bear markets show divergence - initially. In the 1987 market crash, the interest rate initially came down, but quickly powered to new highs: Some of you will remember the 17% interest rates in the late 80's.
Where the market has climbed, interest rates have generally been mixed, except after the 1987 crash and the bear market that lasted until 92'. Since the 1990's, the interest rates have continued to fall, presumably because of the easy to access credit that saw more of the population take advantage of the credit boom and put a higher % of their household earnings towards borrowings.
Based on the evidence, there is a high probability that the variable interest rate will need to move higher (perhaps significantly) should the bear market wear on.
Some observations:
In most cases where there is a bear market (eg 12months or more) the interest rate trend was mostly up during the bear market. Even in the current bear market - the first 7 months of the decline saw higher interest rates.
This divergence can be seen on the red lines between the XAO and the variable interest rate line.
Not all bear markets show divergence - initially. In the 1987 market crash, the interest rate initially came down, but quickly powered to new highs: Some of you will remember the 17% interest rates in the late 80's.
Where the market has climbed, interest rates have generally been mixed, except after the 1987 crash and the bear market that lasted until 92'. Since the 1990's, the interest rates have continued to fall, presumably because of the easy to access credit that saw more of the population take advantage of the credit boom and put a higher % of their household earnings towards borrowings.
Based on the evidence, there is a high probability that the variable interest rate will need to move higher (perhaps significantly) should the bear market wear on.
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Julia
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Interest rates, particularly the RBA cash rate, are not directly determined by what the market is doing.
I'll say no I have a 5% risk factor and that would mean I need 20m to take that bet? Its's obvious you went to uni because you cant be bothered to educate anyone else! Obviously I don't know what is wrong with that statement or I would not have made it. I am only 80% certain interest rates will go to near zero in the future (say 3- 4 years) not overnight. Of course with global warming here(in paradise) Hell might just freeze over. (RBA Rates just to clarify)
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Nope it seems that they are more likely linked to election timing and ego profiles of the incumbent prime minister
Interest rates need to rise, just a small amount so that people get it into their thick skulls that they NEED to stop borrowing and spending.
Stormin_Norman
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surely as the stimulus effect wears out the last thing the government will want to do is raise interest rates, as this will dampen growth in the economy further? better to let it find its feet again post stimulus and then once sustainable growth takes hold start to raise interest rates. the only reason they woudl raise interest rates now woudl be if inflation was seen as an impending threat, and i havent seen any evidence to suggest this????
Stormin_Norman
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government cant control interest rates. apart from spending and its effect on bond prices.
bond prices determine interest rates.
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Ultimately the RBA is a market follower when setting interest rates. There's no magic undertaken by an individual or anyone at the rba when it comes to interest rates...you or I could just as easily set the rates....as EWI points out...
More charts and full article is here: http://www.elliottwave.com/freeupda...Control-Central-Banks-and-Interest-Rates.aspx
At Elliott Wave International, we've said for years that central banks don't control interest rates any more than they control the weather. If conventional economists would simply plot central banks’ decisions on a chart of bond yields, they would likewise discover that bankers simply react to what the bond market dictates.
Here is a chart of the 3-month Australian Treasury Bills that our Asian-Pacific Financial Forecast subscribers saw in the April 2009 issue, with the note from the editor Mark Galasiewski:
Here is a chart of the 3-month Australian Treasury Bills that our Asian-Pacific Financial Forecast subscribers saw in the April 2009 issue, with the note from the editor Mark Galasiewski:
More charts and full article is here: http://www.elliottwave.com/freeupda...Control-Central-Banks-and-Interest-Rates.aspx
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Today's scuttlebutt would tend to reinforce that claim....
"BANKS have confirmed homeowners' worst fears: they will increase mortgage rates by more than the official Reserve Bank rises in the coming months.
The Big Four banks claim they will be forced to lift interest rates beyond the official RBA cash rate increases because they are facing higher costs of raising money in the wholesale markets, The Sunday Telegraph reports." http://www.news.com.au/business/money/story/0,28323,26194165-5013952,00.html
No surprise at all, huh?
Given that even Blind Freddie could have foreseen this train of events, any FH buyer that has been crowing about how great the future for housing looks and who now starts whingeing about being squeezed by rising rates gets NIL POI from me....
Your observations are correct but I have a different take on the reason interest rates initially went up during bear markets, the market points the way to the future ahead of time and when it tops the real underlying economy is still strong so driving rates up until the real economy starts to slow.
Your chart of interest rates against the market shows a clearly defined 3rd wave up to 87 (in the market)and then a 5th wave from 91 to 2007/8 with interest rates going nowhere near as high as in the 3rd wave so giving confirmation that there was nowhere near the demand for money in the 5th wave.As we'dexpect
Now (IMO) we are near the end of wave B and so interest rates should rise and continue to rise for a short while after the end of the B wave (How close to the end I'm not sure but I suspect within a couple of weeks (could be very wrong here)
and then rates will dive as wave C gathers pace IMO as a)there is less supply to lend but also there are less people who qualify or want to borrow
Just a different perpective
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I personally think that there should be some legislation to govern the lenders a little bit more on interest rates that they are allowed to charge on home loans, in particular the following points;
When the RBA raises rates, loan providers are not allowed to raise their rates within a 10-14 day period following the rate decision. (The big 4 have already raised rates since the decision last week)
When the RBA lowers rates, the loan providers must lower rates within a 10-14 day period.
Interest rates on fixed (upto 5 year fixed) or variable home loan rates must be within 200 bases points of the RBA Offical cash rate.
Break fees - well, haven't we been taken for a ride here. I recently had to pay over 8k to get out of a 180k loan? JOKE!!! Should be capped at a MAX of 1% of the loan. And l've heard more horror stories than this. Come on, break fees, admin fees, they hit you with everything bar the fence post!
Now, this is just my 2 cents worth, so please don't cut me down. I feel that we are getting taken for a ride sometimes here in Oz.
Next to go also should be ATM fees. In the UK, you can use any of the big 5 banks without fees....but that's another topic and not really about interest rates, oh well, got to dream.
When the RBA raises rates, loan providers are not allowed to raise their rates within a 10-14 day period following the rate decision. (The big 4 have already raised rates since the decision last week)
When the RBA lowers rates, the loan providers must lower rates within a 10-14 day period.
Interest rates on fixed (upto 5 year fixed) or variable home loan rates must be within 200 bases points of the RBA Offical cash rate.
Break fees - well, haven't we been taken for a ride here. I recently had to pay over 8k to get out of a 180k loan? JOKE!!! Should be capped at a MAX of 1% of the loan. And l've heard more horror stories than this. Come on, break fees, admin fees, they hit you with everything bar the fence post!
Now, this is just my 2 cents worth, so please don't cut me down. I feel that we are getting taken for a ride sometimes here in Oz.
Next to go also should be ATM fees. In the UK, you can use any of the big 5 banks without fees....but that's another topic and not really about interest rates, oh well, got to dream.
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