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Australian Interest Rate Increase

Australian Interest Rate Increase

Old May 2nd 2006, 11:57 pm
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Default Australian Interest Rate Increase

Hi

Interest rates have just been increased - not too unexpectedly - by 0.25% to 5.75%

Should be interesting on the exchange rate front for the next couple of days!

Regards

Jim
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Old May 3rd 2006, 12:01 am
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Default Re: Australian Interest Rate Increase

Originally Posted by Jimclevs
Hi

Interest rates have just been increased - not too unexpectedly - by 0.25% to 5.75%

Should be interesting on the exchange rate front for the next couple of days!

Regards

Jim

......... and there goes the small recovery in the housing market.

Jim
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Old May 3rd 2006, 12:04 am
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Default Re: Australian Interest Rate Increase

Originally Posted by Jimclevs
Should be interesting on the exchange rate front for the next couple of days!
looking at the graph it is easy to spot when the interest rate announcement was made
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Old May 3rd 2006, 12:09 am
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Default Re: Australian Interest Rate Increase

Originally Posted by walaj
looking at the graph it is easy to spot when the interest rate announcement was made
Yes, you're right. I was actually checking HIFX's rates, out of curiosity, at the time of the announcement!

As always with these things, minutes can make a big difference on a spot deal.

Jim
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Old May 3rd 2006, 7:40 am
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Default Re: Australian Interest Rate Increase

As for mortgages / housing market....I don't think this rise will make a big differerence. However if there is another one there could be chaos. It seems people here (Sydney) are happy to mortgage to the max. There was an article in the SMH at the weekend on this very subject refering to them as the "I want generation", they avoid the property progression ladder of old and go straight for the million dollar mansion as a first house.
Between the wife and I our combined salaries are nearly $150K pa, which I believe is well above the average. On enquiring about a mortgage we were offered $850k (GBP357K) or over 5.5 times our combined salaries, which to us seemed madness as it would leave us next to no money to live on each month. When I pointed this out to the rep, he did not seem bothered at all. We basically stuck to UK bank calculations and went for 3x times our combined salaries. But no doubt there are people out there who have taken mortgages of this size, I think they could be close to be being caught out.
As a comparison I should think Oz mortgages are about 3/4 - 1% higher than the UK as well which also makes mortgages here less affordable to start with.
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Old May 3rd 2006, 7:46 am
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Default Re: Australian Interest Rate Increase

possible bite
http://www.smh.com.au/news/business/...335767644.html

Banks are expected to pass on today's interest rate rise in full to lift standard variable rates above 7.5 per cent.

The Reserve Bank of Australia today lifted official interest rates by a quarter of one percentage point to 5.75 per cent, the first move since March last year.

The banks could now lift their home loan rates from the current level around 7.32 per cent to about 7.57 per cent.

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Old May 3rd 2006, 9:14 am
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Default Re: Australian Interest Rate Increase

Yep - totally f****D up the exchange rate for those waiting to buy AUD's.

Let's hope the BoE lifts rates too to compensate
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Old May 3rd 2006, 10:08 am
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Default Re: Australian Interest Rate Increase

Originally Posted by marco121068
Yep - totally f****D up the exchange rate for those waiting to buy AUD's.

Let's hope the BoE lifts rates too to compensate
Won't this have the opposite effect and weaken confidence in the Australian economy leading to a weaker dollar?
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Old May 3rd 2006, 10:13 am
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Default Re: Australian Interest Rate Increase

Originally Posted by DunRoaminTheUK
Won't this have the opposite effect and weaken confidence in the Australian economy leading to a weaker dollar?
Hmm - not sure on that one. It's certainly had a crap effect in the immediate term.
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Old May 3rd 2006, 10:14 am
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Default Re: Australian Interest Rate Increase

Originally Posted by marco121068
Hmm - not sure on that one. It's certainly had a crap effect in the immediate term.
It was at almost $2.42 yesterday but it seems to have taken a dive to $2.38 this morning.

I always thought that higher interest rates generally have a negative effect on the economy (in the short term)?
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Old May 3rd 2006, 10:17 am
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Default Re: Australian Interest Rate Increase

Originally Posted by DunRoaminTheUK
Won't this have the opposite effect and weaken confidence in the Australian economy leading to a weaker dollar?
In very simple terms, other things being equal, a rise in interest rates means that there is an increase in returns on savings and investments (as well as higher interest on mortgages, loans and overdrafts). This makes it more attractive for overseas investors and so there is an increase in demand and hence price (exchange rate) for Australian dollars. That's the theory.

The news of the interest rate rises is good for some (such as us who are savers and not borrowers in Oz).

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Old May 3rd 2006, 10:21 am
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Default Re: Australian Interest Rate Increase

Originally Posted by DunRoaminTheUK
It was at almost $2.42 yesterday but it seems to have taken a dive to $2.38 this morning.

I always thought that higher interest rates generally have a negative effect on the economy (in the short term)?
A 'fall' as you put it is a fall in what the £ will buy, so it is a 'rise' in the A$*. As I said, increased demand for A$'s, price goes up (i.e. £stg buys fewer A$'s).

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*using your figures A$1 bought 41.3p yesterday, buys 42p today
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Old May 3rd 2006, 10:21 am
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Default Re: Australian Interest Rate Increase

Originally Posted by OzTennis
In very simple terms, other things being equal, a rise in interest rates means that there is an increase in returns on savings and investments (as well as higher interest on mortgages, loans and overdrafts). This makes it more attractive for overseas investors and so there is an increase in demand and hence price (exchange rate) for Australian dollars. That's the theory.

The news of the interest rate rises is good for some (such as us who are savers and not borrowers in Oz).

OzTennis
So, what you mean is that you get less dollars for your pound (i.e. dollar gains strength against sterling?)?
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Old May 3rd 2006, 10:21 am
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Default Re: Australian Interest Rate Increase

Originally Posted by OzTennis
A 'fall' as you put it is a fall in what the £ will buy, so it is a 'rise' in the A$*. As I said, increased demand for A$'s, price goes up (i.e. £stg buys fewer A$'s).

OzTennis

*using your figures A$1 bought 41.3p yesterday, buys 42p today
Oh balls....
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Old May 3rd 2006, 10:23 am
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Default Re: Australian Interest Rate Increase

Originally Posted by DunRoaminTheUK
So, what you mean is that you get less dollars for your pound (i.e. dollar gains strength against sterling?)?
Yeah, you posted before I did!

If you divide 1 by 2.42 or 2.38 you get what the dollar buys (reciprocal).

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