ABCDiamond

The continuing demand for 'expensive' houses will not see that happen.

bcworld

So the goverment has indicated it will continue to stimulate the economy into 2010, while the RBA seems to be tightening...doesn't seem quite right!

johnnyx0

So the RBA base rate is 3.5%, and then the banks add their chunk and the actual mortgage rate is now 6% (thats what the Commonwealth are saying today). The banks add 2.5% onto the RBA rate, which seems a lot to me.

Q. How much do UK banks add onto the standard rate?

This amount the Aus banks chuck onto the base rate seems like it's cause for problems to me. The RBA rate is low enough for them to call them "Emergency Lows," but what the actual consumer pays certainly doesn't seem like a bargain....

Q. When the RBA base is 6%, then will the bank still add 2.5%, or will it be more?

koalakim

Aus banks are evil..................but probably why they haven't been in trouble like the UK and US ones.

I think in the UK it's about a 1% above but our last tracker was only 0.49% above base.

The Oz banks have been criticised for bumping up the rates quickly but being slow to bring them down when the dropped.

They are in business for their shareholders....so buy bank shares!

bcworld

When base rates were around 7.25% not that long ago then standard variable loan rates were 9% plus, I think even close to the mid-9's. Most people qualify for a 0.7% discount on that rate on some basis though, size of loan, income etc.

BadgeIsBack

That's true - it might well be that most will not be paying the full variable rate in any case. Also as rates rise, there will be more competition. Might be a sweet spot somewhere. Many people have missed the ultra low deals now anyhow or will only have another year to go on a rate they got at the low point anyhow.

swigski

There is 'continuing demand' for housing which is expensive mainly amongst middle to high income earners who have taken the opportunity to move up the property ladder during the Governments Stimulus period therefore taking advantage of increased demand for their particular price range. This will not last for long.

It seems strange to me that the Government seems to be saying that it needs to continue with it's stimulus into 2010 and the RBA is rising interest rates to combat inflation!! 2 different agendas it seems1

ABCDiamond

The CBA rate was 5.99% after the October increase, it will be 6.24% from 9th November.

But look at the future, based on their fixed rates:

Commonwealth Bank 5 Year Fixed Rate Mortgage
x.xx% ? November 2009
8.04% October 2009
7.34% June 2009
6.39% March 2009


But see how the Standard Variable Mortgage Interest rates have moved about since 1972:
1972 - 1975 rates went UP from 7% to 10.38%
1975 - 1983 rates went UP from 10.38% to 12.5%
1983 - 1996 rates went DOWN from 12.5% to 10.5%
1996 - 2007 rates went DOWN from 10.5% to 8.55%

Currently 5.99% but going up to 6.24% next week

The pain has not yet begun to get back to normal levels .....

Amazulu

This is one of the main problems with a socialist government - they love spending other people's money.

johnnyx0

I thought they'd already put it up as of yesterday, they normally put them up straight away. And yes, I'd rounded it up from 5.99 to 6%.... (naughty Johnny, smack my hands!)

So the CBA actually add 2.74% to their rates, not 2.5%!

ABCDiamond

I disagree.
There will always be demand for 'expensive' housing in Australia.

My logic being; that many areas of Australia will stay in demand due to location.

Good locations = higher prices.

There is plenty of cheaper housing available, but many people want better than that, and are prepared to pay for it.

As many people say: "why come to Australia and live in a cheap area, you can do that in your own country"

So they look for something better... and more expensive.

bcworld

The thing is, and it may sound like bank propaganda, but there is no direct relationship between the RBA base rate and the bank's funding costs. I'm not saying there is no relationship, but there is also no reason why the bank's rate should always move the same as the RBA or should always differ by a certain percentage.

Centurion

I watched with a smirk as yesterday before the announcement. They had some real estate agent and a building company bemoaning the rising interest rates and declaring it a bad thing. I felt bad for a moment, then realised it was just my lunch repeating on me.

Centurion

Its all about the stepford dream don't you know.

swigski

There will always be demand for 'expensive' housing anywhere because some people have the means to pay these prices!

There is plenty of cheaper housing available and everyone wants better which is why the grant made it possible for lots more people to buy this 'cheaper' housing enabling the current owners to upgrade into more expensive housing which is the point I made and you have therefore backed up.