From the desk of Domain..... The Reserve Bank's cash rate may have risen one percentage point in the past five months, but economists have warned home owners to brace for more to come. Commonwealth Securities chief economist Craig James said yesterday's interest rate rise of 25 basis points was a precursor to at least two steep rate hikes in 2010. "Our view is that the cash rate will be somewhere between four and a half and five per cent over the second half of the year," Mr James said. "We're at least 35 basis point short of where the Reserve Bank wants [interest rates] to be [currently], if we look at decade averages. "The best the average person can do is assume that by the end of the year interest rates could be as much as one percentage point higher, which is equivalent to four typical rate rises. If you factor that into your calculations you're not going to be too far wrong." ------------------------------------------------------------------------------------- It's been interesting talking to fellow investors about such forecasts with IR's - most I've spoken to are comfortable with another 1% rise and don't see it a an impediment to investment. However, if the banks continue to hike rates up without the RBA doing so, it could be a different story.
Well the Australian 10 year bond yields have been drifting higher of late, so I can't imagine getting funding is getting any cheaper for Australian banks at the moment.
