interest rates..2 fix or not?, page-38

What an interesting thread.

One point that I don’t think has been canvassed thoroughly is the ""fear and greed" factor.

As I see it, when interest rates start to rise, Potential borrowers will crystallise, or bring forward their projects in order to take advantage of the lower rates while they last.

Instead of from dampening, this will temporarily accelerate the construction boom and put more pressure on the available money supply.

The RBA has admitted they intend keeping a substantial margin between our official rate and the US rate. This is to encourage overseas investment in Australia. (Obviously we don’t have enough cash of our own to fund domestic demand). They may have to actually increase this margin to attract more overseas funds.

Added to this pressure existing borrowers will be stampeding to lock in. At the end of the day if the banks aren't careful they could have substantial loan books locked in at low rates. They wont like this if rates do move up much.

I'm no expert. These are my opinions only. I've been wrong before (many times)