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Cash Rate Drops from 4.25% to 3.75% - RBA May 2012 Interest Rate Decision; Reserve Bank Slashes Cash Rate by 50 Basis Points
Topic Started: 1 May 2012, 03:31 PM (5,616 Views)
miw
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davel
1 May 2012, 04:15 PM
WTF, a property deal contingent on a rate cut? Thats seriously poor financial planning IMO. What will they do if they raise rates next month or the month after, sell?

Actually I agree with you 100%. I always stress test my thinking based on what would happen if interest rates hit 12%.

But regardless of common sense, an interest rate drop will change sentiment and turn some non-buyers into buyers, some sellers into holders, and some holders into sellers.

But, as somebody with a better turn of phrase once said, "You can't eliminate stupidity, so you should just content yourself with profiting from it."

The potential buyers might or might not be idiots, though. It could be, for example, that they will fix interest for 3 years and they have fixed income investments maturing in 3 years. You never know.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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davel
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miw
1 May 2012, 05:01 PM
davel
1 May 2012, 04:15 PM
WTF, a property deal contingent on a rate cut? Thats seriously poor financial planning IMO. What will they do if they raise rates next month or the month after, sell?

Actually I agree with you 100%. I always stress test my thinking based on what would happen if interest rates hit 12%.

But regardless of common sense, an interest rate drop will change sentiment and turn some non-buyers into buyers, some sellers into holders, and some holders into sellers.

But, as somebody with a better turn of phrase once said, "You can't eliminate stupidity, so you should just content yourself with profiting from it."

The potential buyers might or might not be idiots, though. It could be, for example, that they will fix interest for 3 years and they have fixed income investments maturing in 3 years. You never know.
Fair enough...

A lot comes to expectations - if people believe this will turn the market round, that is more important than the actual affordability boost itself. The acid test is whether that change in sentiment actually comes to pass.
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raveswei
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davel
1 May 2012, 03:34 PM
Wow, they're panicking... their macro-economic narrative from 2010-12 has proven to be hopeless optimistic, so now its out with the big guns!

I'll be very interested to see what this does to the housing market. If it doesnt bring about a pretty dramatic improvement. I'd say the patient is no longer responding to the medicine!
too little too late


FED cut 10 times (7 times 50 points or more) during 2007 and 2008 - it didn't help

Posted Image

BE, BOJ and ECB did similar thing with not much success


once bubble bursts nothing can stop it
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

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WestAussie
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RBA is playing a dangerous game, Id hate to be in their shoes. Housing starts falling rates do nothing for affordability other than to let already built properties to stay at higher prices for longer to try to snag the rare and elusive mine site worker. 3.75% doesn't leave much room for movement and the euro crisis is about to hit us again. As usual govt will step in for a fhb boost I'd say 21k if they are stupid. Or zero if they are smart. Ireland did the same double dip then splat within a year. All those claims of 'we have no housing' really should read 'plenty of housing, we just don't want a new generation to pay less than we paid for it'. People are just going to pay down loans faster. Why would you want to be in debt if chances of loosing your job increase.
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WestAussie
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raveswei
1 May 2012, 05:36 PM
too little too late


FED cut 10 times (7 times 50 points or more) during 2007 and 2008 - it didn't help

Posted Image

BE, BOJ and ECB did similar thing with not much success


once bubble bursts nothing can stop it
If I wasn't on my phone I'd link Ireland, spain and all trying to do the same slash slash slash try to save market but it makes it even worse and the faster they slash the faster they fall. If next month is anything but an increase then you know it's all turn to crap.
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NotFooled
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The Bear Whisperer

Slashing rates didn't work for Japan. But who knows how Aussies will react.
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Sydneyite
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raveswei
1 May 2012, 05:36 PM
FED cut 10 times (7 times 50 points or more) during 2007 and 2008 - it didn't help
Hmmm - so 5 years ago hey? Not long after that in Australia, how many times did the RBA cut rates in 2008 and 2009 again? Did that help the property market? Was quite different here to the US wasn't it? There is absolutely no reason to think we would suddenly be just like them now is there! No sub-prime mortgage crisis for a start - i think that had something to do with the crash over there?
Edited by Sydneyite, 1 May 2012, 06:00 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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themoops
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Plus Rudd gave us the First Home Vendor's Boost. Most people were clueless about it raising prices, now, a lot more people know how evil such a thing is.
stinkbug omosessuale


Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments.
Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck!
See here
Property will be 50-70% off by 2016.
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aupropertyspectator
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themoops
1 May 2012, 06:12 PM
Plus Rudd gave us the First Home Vendor's Boost. Most people were clueless about it raising prices, now, a lot more people know how evil such a thing is.
Just today did I get unconditional finance approval from a smaller lender. I'd say the name of the institution but wouldn't want people to think that I'm working for them or that I favour them over any particular other kind of lender!

Instead, I used my mortgage rep to shortlist the best products available to me (that I also qualify with) and ended up with a newly emerged Credit Union.

I think interest rate fluctuations are more of a concern than the lenders themselves. Today's enormous announcement by the RBA is testament to this. It can have a ripple effect on the entire property game.

I actually blogged a bit about interest rate cuts today; and looked at some positives and negatives of rate-slashings. Worth a read if you have time, check it out here:

http://propertyspectator.blogspot.com.au/2012/05/todays-interest-rate-cuts-coupled-with.html
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WestAussie
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Sydneyite
1 May 2012, 05:59 PM
Hmmm - so 5 years ago hey? Not long after that in Australia, how many times did the RBA cut rates in 2008 and 2009 again? Did that help the property market? Was quite different here to the US wasn't it? There is absolutely no reason to think we would suddenly be just like them now is there! No sub-prime mortgage crisis for a start - i think that had something to do with the crash over there?
Fhb. Look up the owners were brought forward. It was a once in a decade attempt to stabilize it only works if there is potential income available. Guess what, it's not there anymore till it 'recharges'
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