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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 (14,139 Views)
Mike
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Please don't post facts Shadow on how interest rates have always averaged around 5% over the long term. Bears will go crazy as they think the 20 year period from the 70s to the 90s is the norm not an historical aberration.

Our SVR is not even back to levels of the longer term yet, most SVR are just under 6%.

It must have been all those cheap interest rates prior to the 70s that the baby boomers and their parents bought houses so cheaply and built the foundations of wealth they now enjoy.
http://mike-globaleconomy.blogspot.com.au/
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CaptainAl
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I just wish that we could fix our home loan rates for 30 years, the same as they can in the US!!
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miw
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Van The Man
7 Aug 2013, 12:55 PM
So what you are saying Shadow is real (inflation adjusted) mortgage rates in August 2013 are the lowest since 2008 and the early-2000s, but still above levels seen in the 70s? The 1970s were a nice time to buy a home. They were much cheaper (3x incomes) and buyers had their debts inflated away via high inflation and wage increases!
In hindsight the early 1970s was a good time to take on a mortgage as long as you had a job and paid it off quickly before rates skyrocketed.

Of course it was actually much harder to get finance then even if you were prescient.

1972 is an unfortunate time to start that graph. What you see is real mortgage rates being cratered by a big surge in inflation and mortgage rates taking some years to catch up because they were regulated.

The modern regime where anyone with the ability to pay off a loan can get credit at a market price didn't start until Hawke/Keating in 84/85.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Simon
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ads getting in on historic low rates meme

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Edited by Simon, 10 Aug 2013, 09:35 AM.
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When it comes to interest rates investors should learn a bit from history

Robert Simeon
7 April 2014

As widely expected the Reserve Bank of Australia (RBA) decided again to leave the cash rate in a holding pattern for the seventh straight meeting although somewhat surprising the rhetoric was considerably different this time around.

Sydney is the elephant in the room with house prices jumping 15.6% in the last year according to RP Data, although I would add that this is a lazy way of explaining and defining the property markets across Sydney given they are all performing differently – some are hot and some are not.

Back to the RBA where in an extraordinary week we heard both Glenn Stevens and treasury secretary Martin Parkinson publicly declaring that Australia needs to be closely looking at and discussing taxes and government spending. Well not before time. We are fast drawing the conclusion that the elected ones in Canberra have absolutely no idea how to run a business – they appear to be the only ones who don’t believe that the rate of GST needs to be increased.

Reading between the lines there was a clear concern about what will be brought down in the May budget with a clear indication together with framed criticism by Glenn Stevens: “Put simply, there are things that we want to do as a society, and have voted for, that are not fully funded by taxes over the medium term, as is starting to become clear in the lead up to the May budget.”

As strange as it might sound, I’m looking forward to seeing the cash rate increases.

Personally I think it is fabulous when the likes of Messrs Parkinson and Stevens have the fortitude to publicly speak their minds by firing shots at the government on the eve of the budget. Let’s fill in a few gaps – NDIS and paid parental leave are the main culprits to which they were referring.

A perfect case in hand that should be at the forefront of the Abbott government's mind is that $16.2 billion Building and Education Revolution, the master class of the Rudd and Gillard terms which has now been condemned as an international case study of legislative and bureaucratic failure. Reading between the lines again, it would appear that Messrs Stevens and Parkinson are politely pointing out that the Australian economy can ill afford repeats of policy failures.

When you’ve been selling real estate for nearly 30 years, interest rates scare the living daylights out of you! And, as strange as it might sound, I’m looking forward to seeing the cash rate increases. Many economists are suggesting that this will happen in 2015 although I am of the opinion we will start seeing increases sooner rather than later with small increment increases.

Housing bubble fears: property prices could fall 10 to 20% was an interesting piece by Christopher Joye although it lacks market definition. Yes, certain parts of the Australian real estate market are over inflated, those being the new suburbs crashing through the $1,000,000 mark for the very first time which will, as history has shown, be the hardest and fastest hit. By comparison the traditional markets such as Paddington, Mosman, Pymble and Bondi, for example, are tracking upwards although at nowhere near the pace of the hotspot suburbs.

I can see the cash rate moving from its current rate of 2.50% to 3.50% next year which will in time place a number of households under increasing financial pressure, although we have seen this happen time and time again. Most notably in the early 2000s the cash rate fell from 6.25% in September 2000 to 4.25% in December 2001. We then witnessed dramatic market corrections in south-west Sydney as the cash rate started climbing to 7.25% in March 2008 where it then started being eased to where we find it today at 2.50%.

So what amazes me more is that currently we are seeing record numbers of investors entering the market, which can be best described as panic buying – investors now make up 40% of value of total housing loan approvals in NSW and Victoria. So when and where we do see property market corrections this is when we see the astute investors entering the market – the experienced ones are certainly keeping their powder dry.

What this does clearly identify is that politicians and investors pay very little attention to history where more often than not they become part of history.

Read more: http://www.propertyobserver.com.au/forward-planning/investment-strategy/29938-low-interest-rates-how-smart-investors-are-acting-robert-simeon.html
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hoofarted
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"... I’m looking forward to seeing the cash rate increases." So am I... so am I
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Veritas
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Simon
10 Aug 2013, 09:35 AM
ads getting in on historic low rates meme

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All part of the business.

Credit is the drug and they are the dealers.

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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Global interest rates at 5000-year lows

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