Monday, July 7, 2008

Have Interest Rates finally stopped going up???

It has been a while since the RBA has increased base rates and it makes me wonder if perhaps we are seeing a change. Here is why I think not:

1. Fuel prices have gone up.
2. Food prices have increased.
3. Mortgage rates are up.

This should lead to no more rises, shouldn't it?

Well, yes, these factors SHOULD lead to lower IR, but for one overriding factor. The three elements are going to push up rent. Rent will increase, borrowing MAY increase for the stealthy investors who are snapping up some great bargains and there is a slight chance that interest rates aren't done yet.

On the other hand, there is a possibility that IR will start heading downwards. The major banks will not drop their rates claiming "buffering their clients" from future rises, and the building societies and non-banks will have a field day. Guess where this is heading??? Heard of the sub-prime crisis in the US??? Hopefully not with the regulated system over here...


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