The current cash rate sits at 4.25% and home loan rates are hovering between 6 per cent and 7 per cent. It is widely expected the Reserve Bank of Australia (RBA) will cut rates by 50 basis points in February, followed by smaller cuts of 25 basis points in the coming months. This could bring home loan rates down again, to between 5 per cent and 6 per cent.
While no one can dispute the actions were needed, you can't help thinking that when economies right themselves over the next two years inflation will also come storming back. Central banks will then need to abruptly reverse their current strategy and increase interest rates as they once again focus on bringing inflation under control.
While no one can dispute the actions were needed, you can't help thinking that when economies right themselves over the next two years inflation will also come storming back. Central banks will then need to abruptly reverse their current strategy and increase interest rates as they once again focus on bringing inflation under control.
Just the sheer size of government spending tends to make you think that when inflation comes back it will come back with a vengeance and you may see home loan rates back in double digits. History could show that locking in at about 5 per cent for five years in a fixed-rate, fixed-term home loan could be an absolute bargain and a life saver for those with high mortgages.
A lot could happen over the next 12 months and I know one cannot be really sure of the outcome from this year.
But as things unfold it's worth keeping an eye on long-term opportunities that present themselves - the silver lining that often comes in tough times.
Despite the current issues surrounding fixed-rate, fixed-term loans, they could be a long-term bargain in the not-too-distant future and also provide some protection against the long-term consequences of these massive bailouts.