the facts about property pricing, page-11

interest rates are effected by inflation.

inflation is effected by demand on wages.

demand on wages is effected by the cost of living (house prices).


so raising house prices at abnormal levels feeds back into the cash rate.

if the banks dont raise the cash rate in high inflation periods then the banks devalues its cash pool. because what the borrower pays back is worth less than what he borrowed. so interest rates go up to off set inflation.


thats why we had 9% home loans not long ago, and why we had 17% home loans the last time property ran crazy.

thats why high interest rates are coming back.