I'm really interested to see how much lower we can push rates since I think house price growth will probably be fairly proportional to how cheap we make borrowing money. Is Llewellyn-Smith correct in arguing that an OCR floor is probably only about 75bp below where we are now, else we risk trashing our currency? Perhaps we'll get the opportunity to find out? Or perhaps not.
I've thought about fixing - while the floating rate I'm on is pretty damn low, some of their fixed rates are lower still. But I think I might hold off a while longer yet.
It doesn't cost much to service my mortgage at these rates and honestly, I can't see them rising all that much if they do rise - we only need to look back a short while to see what happened when the RBA tried to return the cash rate from emergency GFC lows to a more historically normal setting. It didn't even make it that far before the housing market nosedived. House prices are rising solidly again, I think the glass ceiling for interest rates might have come a bit lower, or is in the process of doing so.
Interesting stuff.
Lets face it leftee, the RBA is inviting people to indulge, and when you do that there is a burden of responsibility on the RBA to not hike rates for a long time. They will know how that will affect new market entrants.
That doesn't mean they can't or won't rise, but I see rates above that 6% to 7% range as highly unlikely in the next decade. That to me is probably the upper limit, with current rates at or close to the lower limit.
Rates in 1950 were about 5% and they didn't rise above 6.5% until 1974.
I tend to agree Peter. And I'd be silly not to take advantage of it (with floating rates delivering a fair bit of that advantage automatically at present).
If b_b is right, and if there does turn out to be reason to drive rates to the zero-bound, there should be another proper housing boom including first-timers (depending on the reason they were pushed that low). And I could probably just about retire since paying the mortgage would require less than a day's casual work at McDonalds.Off the cuff, I think todays capex expectations have another rate cut written all over them - the worst result in 25 years.
If b_b is right, and if there does turn out to be reason to drive rates to the zero-bound, there should be another proper housing boom including first-timers (depending on the reason they were pushed that low).
I would say b_b might be right and i agree with your idea of the potential for another boom, even if it's only moderate and short lived. Something that isn't getting enough airplay IMHO is Glenns' chatter about the "shift to housing" not to mention our pesky AUD that is too damn high. Something else worth considering is that we have the highest cash rate of any other CB worth mentioning. It's party time again.
I'm really interested to see how much lower we can push rates since I think house price growth will probably be fairly proportional to how cheap we make borrowing money. Is Llewellyn-Smith correct in arguing that an OCR floor is probably only about 75bp below where we are now, else we risk trashing our currency? Perhaps we'll get the opportunity to find out? Or perhaps not.
I've thought about fixing - while the floating rate I'm on is pretty damn low, some of their fixed rates are lower still. But I think I might hold off a while longer yet.
It doesn't cost much to service my mortgage at these rates and honestly, I can't see them rising all that much if they do rise - we only need to look back a short while to see what happened when the RBA tried to return the cash rate from emergency GFC lows to a more historically normal setting. It didn't even make it that far before the housing market nosedived. House prices are rising solidly again, I think the glass ceiling for interest rates might have come a bit lower, or is in the process of doing so.
Interesting stuff.
Lets face it leftee, the RBA is inviting people to indulge, and when you do that there is a burden of responsibility on the RBA to not hike rates for a long time. They will know how that will affect new market entrants.
That doesn't mean they can't or won't rise, but I see rates above that 6% to 7% range as highly unlikely in the next decade. That to me is probably the upper limit, with current rates at or close to the lower limit.
Rates in 1950 were about 5% and they didn't rise above 6.5% until 1974.
I tend to agree Peter. And I'd be silly not to take advantage of it (with floating rates delivering a fair bit of that advantage automatically at present).
If b_b is right, and if there does turn out to be reason to drive rates to the zero-bound, there should be another proper housing boom including first-timers (depending on the reason they were pushed that low). And I could probably just about retire since paying the mortgage would require less than a day's casual work at McDonalds.Off the cuff, I think todays capex expectations have another rate cut written all over them - the worst result in 25 years.
Be great for me - as long as I have a job.
Yep - fwd capex still looks weak.
Having said that, I know there are some very large resources projects which are funded and ready to be announced after the election (no point helping Rudd). I understand they are worth around $75bn.
So be a little careful reading too much into the "CAPEX cliff"
Lets face it leftee, the RBA is inviting people to indulge, and when you do that there is a burden of responsibility on the RBA to not hike rates for a long time. They will know how that will affect new market entrants.
That doesn't mean they can't or won't rise, but I see rates above that 6% to 7% range as highly unlikely in the next decade. That to me is probably the upper limit, with current rates at or close to the lower limit.
Rates in 1950 were about 5% and they didn't rise above 6.5% until 1974.
Would troubles in the global bond market be a scenario where IR's would rise?
I see that rates have gone up overseas, i thnk treasuries are 2.8 or so and going up?
I think this led to variable rates rising quite rapidly a few weeks back in the US?
I don’t think enough thought is given to the concept of ‘security of tenure’ and the role that secure long-term housing options have on the health and well-being of individuals, their families and the community more broadly.
The problem with housing policy in Australia is that our focus on the Australian 'dream' of (owning a quarter acre block) has created a system and culture where renting is treated as a transient, short term option and not perceived as being a legitimate way to create a home. This has resulted in a system where residential leases are predominantly 1 – 2 years and the majority of tenants face the threat of eviction/ rent increases on an annual basis. With housing prices as they are, renting is now becoming the only option for many Australians (particularly if they wish to live in the inner city where there is greater access to public transport and other services) and more and more people are forced to live with little to no long-term housing security.
Unfortunately, there is no currently policy debate or changes in sight for the creation of long term tenanting options, especially ones focussed on the principle and importance of creating 'homes'. Without long-term leasing options, more and more people will continue to be excluded from accessing the benefits of long-term ‘security of tenure’ which currently only home ownership provides i.e. a more permanent location to plan for children’s schooling, work, family doctors and dentists, contribution to community etc.
Until we tackle the current culture and attitudes towards renting (not to mention tax policies such as negative gearing) and start recognising the role renting can play as a legitimate long-term housing option, more and more people will continue to be displaced and disadvantaged by housing stress.
I would really love to see all parties thinking outside the square on this issue and debating solutions that diversify and strengthen the role rental accommodation plays in our communities. And the good news is our political parties needn't look far. Private long-term residential leasing models are in operation all over Europe (and have been for decades) and a number of social housing and housing cooperatives in Australia are already delivering in this area.
Actually, I agree with most of this, except that renting has always been seen as transient in Australia, even before the deregulation of the 1980s moved the rental stock away from a mixture of social housing and granny flats to an investor-owned stock. It is not a situation thta has been "created" - at least not in the last 50 years.
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