Does anyone else think the current interest rates (which are becoming less and less by the day) and the new and improved FHOG are potentially creating trouble for the housing market in 3-5 years time?? Look back at what happened in the US after their last recession in 2001. They cut interest rates dramatically from about 6.5% to 1% within the space of about 2 years. This kick started their economy and created the housing boom that lead to the credit crisis we are experiencing now. Basically if you had borrowed in the US in 2003 and fixed your loan for 3 years, when they came due to be fixed again your mortgage repayments would have increased by x5!!!! So imagine if you purchased a house today that you could just afford (as everyone was saying it’s the best time to buy, housing always goes up, if you don’t get in now you’ll miss out etc, etc), used your FHOG as your deposit & locked in a mortgage at today’s rates (NAB’s offering an introductory rate of 4.99%!). Then fast forward 3 – 5 years where interest rates are back where they were at close to 10%. Your repayments are going to be 50% – 100% higher. If you think we have mortgage stress now just wait till 2012 -2013. People have short memories they’ll forget that interest rates can be higher and will borrow up what they can afford today, not what they can afford in 5 years time. We might miss a major housing correction here now, but it will happen eventually.