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A century of Australian interest rates - mortgage rates are not at historic lows or emergency levels
Topic Started: 8 May 2013, 05:41 PM (14,138 Views)
Shadow
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Evil Mouzealot Specufestor

There are a few articles in the MSM at the moment claiming interest rates are now at 'historic lows' or 'emergency levels' following yesterday's RBA rate cut.

Those who claim interest rates are now artificially low are probably placing too much emphasis on the mid 70s to mid 90s period when rates where actually unusually high.

In fact interest rates are now at levels that would have been considered normal for most of the past century.

If past history is a guide, rates could remain close to current levels for a long time.

Data going right back to 1852 shows that prior to 1970 mortgage interest rates were typically around 5% - i.e. at current levels.

http://www.prres.net/papers/Small_Development_Implications_of_Long_Term_Social_Trends.pdf
Posted Image

http://cws.hillross.com.au/sites/dev.hillross-sites.com/files/2012-Jul-19-Olivers-Insights-Have-shares-lost-their-appeal-for-long-term-investors_Hillross.pdf
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Posted Image

http://www.theaustralian.com.au/business/opinion/best-bull-market-in-bonds-in-our-lifetimes/story-e6frg9r6-1226383902307
Posted Image
Edited by Shadow, 8 May 2013, 05:44 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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apex
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Shadow
8 May 2013, 05:41 PM
In fact interest rates are now at levels that would have been considered normal for most of the past century.

If past history is a guide, rates could remain close to current levels for a long time.
Are you expecting several world wars and great depressions like last time interest rates stayed low for a long time?
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Ex BP Golly
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Wow.....and house prices were low too!

The banks realy cleaned up big time on the ponzi.

Still, I hope they can find a new vehicle for raping massive profits.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Veritas
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Quote:
 
If past history is a guide, rates could remain close to current levels for a long time.


Macroeconomic policy makers have two basic tools at their disposal: monetary policy and fiscal policy.

As long as the central bank thinks it can stimulate the economy, presuming such stimulus is required, without causing unhealthy levels of inflation then rates can and will remain low.

The experience of the US and the EU since the crisis has taught us however of the limits of monetary policy: even cutting rates to zero cannot boost aggreagate demand adequately. But given their liquidity trap position nor does it induce inflation or hyperinflation. At that point, demand can only be sustained through fiscal policy i.e. appropraite fiscal stimulus measures.

Personally, I think the RBA is worried household debt levels as is seizing what is a good opportunity to allow people to pay down some of that debt. I will be interesting to see, however, what this will do to inflation figures, especially in the States that are doing well comparatively.

Posted Image



Edited by Veritas, 8 May 2013, 06:06 PM.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Poontang
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Shadow
8 May 2013, 05:41 PM


If past history is a guide, rates could remain close to current levels for a long time.

Yes, they could...

They also might not and it would be foolish of someone to take on a mortgage based on the view that mortgage rates will be low for a long time.

Not allowing a buffer for higher rates and/or a drop down to single income (for dual income purchasers) could well be a recipe for disaster..

A common rule of thumb is to allow for mortgage rates to rise 2% and still be able to afford repayments.
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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Frank Castle
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Business As Usual

Poontang
8 May 2013, 06:10 PM
Yes, they could...

They also might not and it would be foolish of someone to take on a mortgage based on the view that mortgage rates will be low for a long time.

It'll be interesting for you to look back in 20 years time and wonder who the foolish one was.
He who sat on his hands in fear?
Or he that got on with the job, made out like a bandit and set themselves up for life.

Of course then you'll say he was "Just lucky" and call them all sorts of rude names as the bears are prone to do..

Quote:
 
A common rule of thumb is to allow for mortgage rates to rise 2% and still be able to afford repayments.

I do agree
Edited by Frank Castle, 8 May 2013, 06:17 PM.
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The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
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Veritas
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Frank Castle
8 May 2013, 06:16 PM
It'll be interesting for you to look back in 20 years time and wonder who the foolish one was.
He who sat on his hands in fear?
Or he that got on with the job, made out like a bandit and set themselves up for life.

Of course then you'll say he was "Just lucky" and call them all sorts of rude names as the bears are prone to do..
Talk us through that Frank.

How do you make out like a bandit under these conditions?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Poontang
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Frank Castle
8 May 2013, 06:16 PM
It'll be interesting for you to look back in 20 years time and wonder who the foolish one was.
He who sat on his hands in fear?
Or he that got on with the job, made out like a bandit and set themselves up for life.

Of course then you'll say he was "Just lucky" and call them all sorts of rude names as the bears are prone to do..



I do agree
I will have purchased a home long before the 20 years is up and would hope to have a couple of investment properties becoming free and clear of mortgages by then.

As for the investment portfolios on the forum, if they outperform over the next few years I will have just been lucky too ;)

As for the rude names, I do not see the point. The forum is just words on the screen, no need to get emotive about them and those whom post the words.
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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Blondie girl
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Frank Castle
8 May 2013, 06:16 PM
It'll be interesting for you to look back in 20 years time and wonder who the foolish one was.
He who sat on his hands in fear?
Or he that got on with the job, made out like a bandit and set themselves up for life.

Of course then you'll say he was "Just lucky" and call them all sorts of rude names as the bears are prone to do..



I do agree
Skull face
I've given up on some like Veritas who just don't get it.

I've grown up with real estate mad parents, who knew how to accumulate a positive portfolio for many years.
Got a mum who knows how to dig soak wells ..a mans job..& worked hard with dad to make property work.

The RBA Is perhaps trying to stimulate investment & retail, me thinks.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Frank Castle
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Business As Usual

Veritas
8 May 2013, 06:18 PM
Talk us through that Frank.

How do you make out like a bandit under these conditions?
Quite easily when the likes of you are shitting your pants letting opportunity walk on by.

Buy things like these

http://imageshack.us/photo/my-images/574/wandaldouble.jpg/

http://imageshack.us/photo/my-images/408/1012m2169k.jpg/

and turn them into 2 or 3 of these

http://imageshack.us/photo/my-images/819/wandalwaterfrontdec2010.jpg/

http://imageshack.us/photo/my-images/801/27gardnersttherange.jpg/

http://imageshack.us/photo/my-images/560/47wilkinsonstwandal.jpg/

or 4 of these

http://imageshack.us/photo/my-images/521/dualduplex.jpg/
Edited by Frank Castle, 8 May 2013, 06:48 PM.
Ignore posts by The Whole Truth · View Post · End Ignoring
The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
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