Interest Rate Movement

November 17, 2016

It’s not just the election of Donald Trump as the next President of the USA which has seen a recent upward bias in interest rate movement here in Australia, but also some of the actual economic results coming out of the USA. Some reasonable data on jobs growth & lower unemployment, & overall strengthening in the USA economy, has confirmed this.

 

In very general terms, stronger growth signals mean more likelihood of price increases, feeding into upward pressure on interest rates. Australian financial markets would look at this position & therefore try & counter this by building in some increase in medium to longer term cost of money. It’s always a tough call when economies are at different positions in their economic cycle & Australia outside of the residential construction industry, has been struggling with underemployment for some time now, since the decline of the mining boom.

 

Economic growth in Australia has been moderating. An increase in interest rates on the lending side here in Australia, is a ‘tightrope walking’ exercise at present. That’s reflected in the short term cost of money which is still fairly static & not a great likelihood of showing an upturn at present. However, in the last 2 weeks the fixed interest rates for 2, 5 & 10 year terms have risen by around 10 to 15 basis points (under ¼ of a percent).

 

It’s once again giving us ‘food for thought’ as to whether it might not be time to consider just taking a bit of insurance out on future interest rate rises by taking one of those fixed rate loans?

 

In saying that over the two week period since early November there is not one lender yet to raise any of their fixed term loan rates.

 

Please call me (Michael) on 65832211 if you would like to discuss this further or to simply review your lending needs.      

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