As we all know, interest rates rose again for the 12th time and many of the banks are expected to increase rates even more than the 25 base points increase in the official cash rate announced by the Reserve Bank.
Its interesting to note that the reason many banks have and are considering again to increase their rates above the official cash rate has been blamed on the cost of wholesale funds, primarily from the states. I guess nobody at the banks wants to point out at that over the past couple of days the mortgage rates in the US have dropped dramatically from the insane levels of just last month and are expected to drop even further over coming months.
Many commentators have interpreted the RBA announcement as much softer than previous announcements and implying that the strategy of lifting interest rates is working as they had hoped. Read into this what you want I suppose…
With the Government looking at switching costs at the moment fixed loans may become more popular. It seems that journalists would rather focus on increasing mortgagee sales, interest rates spiralling out of control or one of countless other doom and gloom stories. The easy availability of fixed interest loans allow buyers the security of knowing that repayments will not change over a 3 to 5 years or even longer period. Many home owners look at upgrading their homes every 3 to 5 years anyway so for many it is possible to insulate themselves from rate rises and have the same payments every month they live in the home.
So what is everyone else’s opinion on what will happen with interest rates for 2008? Will we have the 13th, 14th etc consecutive rises? Will interest rates spiral out of control by year end or will they hold steady? Or will someone be brave enough to predict a drop sometime this year?
For what its worth and to kick it off, here is my prediction… We will not get an interest rates rise next announcement and throughout the rest of the year we will see it hold fairly steady with occasional rises only.