Property Prices Predicted to Rise in Australia (2022)
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Transcript of - Are Interest Rates Rising in Australia?
Hey guys, this is an opinion piece on interest rates and fixed home loans. It is by no means financial advice or what you should do.
What is the cause?
In the past few months, there’s been plenty of talk of interest rate rises, and therefore heaps of clients asking me if they should fix or not. Excuse my technical speak for a second, but this has been caused by global inflation fears, and the US central bank stating they will hike rates several times in the next 12 months. What’s America got to do with the Australian economy? It matters because about 70% of the world’s trade is done in US dollars. This means anything they do will affect us, as global financial markets are all linked. The GFC taught us that much, enough of the technical talk.
What are the reasons?
Personally, I haven’t fixed any of my debts. There’s a lot of technical reasons for this, but I’m going to give you some basic ones. Firstly, let’s address the two main reasons why interest rates will rise, then I’ll come up with some basic counter arguments. Reason number one; we’re due. This is actually the main reason why people think rates will rise. The reason actually does not make any sense. And it’s a reason brought about I think over fear, the basic response I have to that is to look at a graph of the Australian home loan interest rates since the early 90s. I get the ‘we’re due’ reason. Unfortunately, you’re working against a 30-year trend here and the probability favours the trend.
Reason number two; the experts are saying that interest rates will rise. Since when have we started trusting economists, politicians and banks? Let’s look at the Reserve Bank’s interest rate forecasts over recent times. As you can see here, they constantly have it wrong. Why? Because when they communicate these things to the public, they want people to react to what they are saying, they’re not incorrect because they’re stupid. They want the spending behaviours of the public to change in a certain way. And it’s worked in the past. These guys literally think they’re magicians because they’re good at the art of misdirection. Don’t start me with the magic money printing stuff because I swear, I won’t stop. Politicians. Let’s be honest, everyone knows they’re not working for us.
Who should you listen too?
The other experts you should be sceptical about is banks. There are countless examples. But let’s go back two years to the early pandemic, our largest banks came out and said property would drop between 10 and 32%. We all know what happened since then. Surprisingly, if you think contrary to what’s shoved in your face via mass media, you’ll likely be closer to the truth than by listening to the so-called experts. This is an observation I’ve made and has surprisingly worked out well in the last few years, you might raise the fact that banks have already started raising their fixed interest rates. Again, I’ll point you back to the fact that banks have been wrong on the property market in the last two years.
What is the best option for you?
Look, the thing is, these are the most uncertain of times. It’s the right call for you if you want to fix your home loan because you concerned about rising home loan repayments, you just need to be cool with the fact that if variable rates start decreasing further, then you may be paying a bit more by parking it in a fixed homeloan. Sometimes the peace of mind is worth it. For me, these are uncertain times. I don’t trust anyone. Before I change my mind on the whole interest rate things. I’m going to want to see incomes go up. And we haven’t had that for about 10 years. As this Russia-Ukraine war goes on. I have a higher and higher conviction that the global economy is going to slow down anyway. Why would you possibly raise interest rates in that time? I don’t know.
The Wrap-Up!
Anyway, the great thing I love about these sorts of views and opinions is that time will always tell if you’ve watched all the way through to the end. Please like and subscribe. You don’t have to agree with me. It’s important that we respectfully converse with people have opinions different than ours. That’s how we can learn and get better. If you need help with a home loan, then please get in touch!
