No Guns … No Horses

Why Interest Rates Will Start To Soar!

Posted on 01. Apr, 2009 by Chris Lang in Economic Issues, Global Scene, Interest Rates, Retail Sector, Using Debt, Your Exposure

If you’re like most people you are probably trying to second guess whether or not the RBA will reduce official interest rates by 0.25% or 0.5% over the next month or so.

So, should you fix your rates on your Commercial property now, or wait a while?

Realistically, you need to study what is actually happening around you. And I would counsel you to view things over the long term, rather than merely the short term.

Let me explain why.

• China’s Central Bank is forecasting its economy will recover strongly over the second and third quarters of 2009. Its stimulus package doesn’t need to fill any financial “black holes” — like in the US and UK. And, therefore, it is already creating improvement in household consumption, investment and real estate.

• After 6 months of decline, America’s consumer spending edged up for a second month in February. It rose by 0.2% last month, following a 1% rise in January. And consumer spending represents about 70% of total economic activity.

• US Treasury bond yields have been falling now for 298 months — the longest decline recorded decline since 1861.

• There has been a massive injection of funds into the global economy — together with a range of other stimulus packages.

For a number of reasons … today’s economy is more dynamic, and will respond far quicker, than during the last century.

When it does occur, the recovery will be quick … and be accompanied by raging inflation. And this will force the central banks around the world to quickly raise their rates, simply to curb runaway inflation.

Therefore, don’t be surprised to see interest rates return to the levels seen in the late 1980s, over the next 10-12 years.

Bottom Line: Secure some good, well-leased Commercial property over the next 6 months — to benefit from the surge in values that will follow the recovery.

Then, protect yourself by locking in your interest rates … for as long as you possibly can.

And if you feel you need help with that, just let me know.

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